Question

Describe semi-government and non-government bonds within the bond market, and explain their contributions to the market’s performance of the flow-of-funds and price discovery functions.

Answer 1

Semi government bonds: Semi government bonds are those bonds that are issued by the various states and territories government and are much like a commonwealth government bonds. These bonds carries various maturities and rates of interest. The yield on semi government bonds are slightly higher than the commonwealth government bonds due to slightly higher credit risk. It is sometimes difficult for an investor to choose among these type of bonds as yield reports are not widely published. But, investor can invest in these type of bonds for higher earnings in comparison to other similar bonds.

Non-government bonds: Non-government bonds are those bonds that are not guaranteed by the national government and are issued by various states, provinces, cities for capital requirements for school, hospital, bridge etc. These bonds carries high yield but low price.