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Banking. Government securities (Western model) (lecture notes)

Lecture notes, cheat sheets

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Government securities (western model)

Marketable securities, which account for 2/3 of the total debt and which are freely sold and bought, are represented by treasury bills, notes and bonds.

Promissory notes - obligations for 3, 6 and 12 months - do not contain interest coupons and are sold at a discount from face value, but are redeemed at full face value. As a rule, they are placed among financial institutions and commercial and industrial corporations, and are also used as a secondary reserve of liquid funds. This provides loan capitalists with the appropriation of interest income, since term deposits do not bring additional income.

Notes - medium-term bonds with a term of one to 5 years, which can be used for the subsequent payment of taxes. Interest on them is paid once every six months. The use of notes, as well as certificates of indebtedness, enables corporations to earn large returns on funds earmarked for taxes until due date.

Bony - long-term bonds for a period of 5 to 25 years, the interest on which is paid twice a year.

Difficulties in the placement of government securities led to the issuance of non-marketable securities, consisting of savings bonds and tax savings notes. The latter can be presented for payment at any time at the request of the depositor. However, under the current conditions for early presentation, the interest is sharply reduced. The main purpose of issuing non-marketable securities is to attract the public's money savings.

Author: Shevchuk D.A.

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