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Government gilt bonds

  • Posted By
    10Pointer
  • Categories
    Economy
  • Published
    12th Feb, 2021

Context

Terming it a “structural reform”, the RBI has proposed to allow retail investors direct access to its platform.

Now, Retail investors can directly open their gilt accounts to access both the primary and secondary markets.

What are Government gilt bonds?

  • Gilt funds are debt funds that only invest in fixed-interest generating securities issued by the Central and state governments.
  • The term giltis often used informally to describe any bond that has a very low risk of default.
  • These funds have no risk of non-payment of interest or principal amount.
  • It gets affected by interest rate movements as the Governmentborrowing typically happens to be for a longer duration.

Features of gilt bonds

  • These bonds are suitable when interest rates in the economy are expected to come down
  • They are ideal for an investment horizon of at least 3-5 years
  • These bonds might see volatility during times of important economic events