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Government Bonds Mechanics and Strategy

Government Bonds Mechanics and Strategy »

Government needs to fund its operational and capital expenditures, as does business. The main source of revenue for the government is taxation receipts; however, as times, expenditures exceed receipts and the government has a budget deficit. When the Government’s annual budget is in deficit, the government borrows from the public through the sale of medium-to-longer-term Treasury bonds
Within a financial year, the government will experience a mismatch of its cash flows, and will need to raise short-term funds to smooth out is cash flows over time. To fund those months, and …