Royal Government Bond
A Royal Government Bond is a form of debt security issued by the Directorate of Finance under the authority of the Government Finance Act of 2013. The bond is fully-backed by the Royal Government, making it a low-risk investment for the holder.
Purpose
Pursuant to the Government Finance Act, a Royal Government Bond is offered solely as a means of raising funds to alleviate any budgetary deficit incurred by the Royal Government. This in essence makes the bond a tool to allow the Royal Government to balance its budget, as opposed to being a tool that can be readily accessed to finance particular programme costs or investments.
Issuance and Conditions
When revenue must be raised through this means, the Directorate of Finance issues notice of the offering of a "Bond Series". A Bond Series may consist of different classes which offer repayment of principal at varying times, as well as varying coupon (interest) rates. The principal plus coupon earned on the series is normally payable at maturity, though multi-year terms may offer annual payout of the coupon, or compounding thereof over multiple years.
On purchasing a bond, the holder is issued a Bond Certificate that reflects the terms of the bond and guarantees repayment.
Currently, no legislation exists concerning the re-sale of bonds between private parties.
Past Bond Series
Since the inception of the Royal Government Bond, only one series has been issued, in 2013.
2013 Series
The first bond offering by the Directorate of Finance, designated the 2013 Bond Series occurred on November 20, 2013[1]. A total of three classes of bonds were offered with coupons rates ranging from 5% to 9%, and repayment dates of 6 months to 12 months.
| 2013 Bond Series Classes | ||
|---|---|---|
| Class | Term (Months) | Coupon Rate |
| A1 | 6 | 5% |
| B1 | 9 | 7% |
| C1 | 12 | 9% |
The 2013 Bond Series was offered for purchase until December 31, 2013. Two bonds were purchased (one of each of the A1 and B1 classes) raising a total sum of Th57,500 for the Royal Government to offset its budget deficit for that year[2]. The total cost of borrowing incurred by the Royal Government for the series was Th1,625, in addition to the required full repayment of the principal of each bond at maturity.
References
- ^ Buy Royal Government Bonds today! - 2013 Bond Series advertisement in the Furstenmarkt, Gotzborg Community Forums. Accessed November 23, 2016.
- ^ 2013 Bond Series Ledger, Directorate of Finance, PRO DCN FIN-004-13.
