A government bond is essentially a way for a government to borrow money from investors. When you purchase a government bond, you are essentially lending money to the government in exchange for periodic interest payments and the return of the principal amount at maturity.
Issuer
The government (the South African Government in the case of EasyGovBonds available on EasyEquities) is the issuer of the bond. Governments issue bonds to fund various projects, infrastructure development, or to cover budget deficits.
Face Value
This is the principal amount of the bond, which is the amount the bondholder will receive when the bond matures.
Coupon Rate
This is the interest rate that the government agrees to pay the bondholder, usually expressed as a percentage of the face value. The interest is typically paid semiannually.
Maturity Date
This is the date on which the government repays the principal amount to the bondholder. Government bonds can have various maturity periods, ranging from a few months to several decades.
Market Price
The price at which government bonds are bought and sold in the secondary market can fluctuate based on changes in interest rates, economic conditions, and other factors.
South African government bonds are considered risk free investments because they are backed by the government's ability to tax its citizens or print more money to meet its debt obligations. As a result, government bonds are often used as a benchmark for other types of debt securities and are considered a safe-haven investment in times of economic uncertainty.
Investors in government bonds receive regular interest payments and get the return of their principal when the bond matures, making them a source of income and a way to preserve capital.