Government Securities Introduction - Security Analysis and Investment Management

The government needs enormous amount of money to perform the following main functions:

  • Provision of public services such as law and order; a justice, national defences, and so on.
  • Central banking and monetary regulation.
  • Creation and maintenance of physical infrastructure.

The government generates revenue in the form of taxes and income from ownership of assets. Besides these, it borrows extensively from banks, financial institutions, and the public to finance its expenditure in excess of its revenues.

One of the important source of borrowing funds is the government securities market (GSM). The government raises short-term and long term funds by issuing securities. These securities do not carry risk and are as good as the government guarantees the payment of interest and the repayment of principal. They are, therefore, referred to as gilt-edged securities. The government securities market is the largest market in any economic system and therefore, is the benchmark for other markets.

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Security Analysis and Investment Management Topics