{"id":1779,"date":"2019-09-27T13:33:00","date_gmt":"2019-09-27T13:33:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=1779"},"modified":"2026-09-21T19:07:02","modified_gmt":"2026-09-21T19:07:02","slug":"securities-issued-sovereign-governments","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/fixed-income\/securities-issued-sovereign-governments\/","title":{"rendered":"Securities Issued by Sovereign Governments"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Fixed-Income Markets: Issuance, Trading and Funding (2025 Level I CFA\u00ae Exam \u2013 Fixed Income\u2013Module 2)\",\n  \"description\": \"This video lesson covers the structure of global fixed-income markets for CFA Level I. It explains classifications, interbank offered rates, bond issuance methods, primary and secondary markets, government and corporate debt, structured products, short-term bank funding, and repurchase agreements along with their associated risks.\",\n  \"uploadDate\": \"2022-05-20T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/img.youtube.com\/vi\/l7RAt_PtF9g\/maxresdefault.jpg\",\n  \"contentUrl\": \"https:\/\/www.youtube.com\/watch?v=l7RAt_PtF9g\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/l7RAt_PtF9g\",\n  \"duration\": \"PT48M15S\"\n}\n<\/script>\n\n\n\n<iframe loading=\"lazy\" width=\"560\" height=\"315\" src=\"https:\/\/www.youtube.com\/embed\/l7RAt_PtF9g?si=MKXzjAeGbmoCa24b\" title=\"YouTube video player\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n\n\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Most sovereign debts that have a maturity longer than one year are:\",\n    \"text\": \"Options:\\n1. Floating-rate instruments.\\n2. Zero-coupon instruments.\\n3. Coupon-bearing instruments.\",\n    \"answerCount\": 1,\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is C. Most sovereign debt instruments issued by national governments with maturities longer than one year are coupon-bearing instruments. These securities make periodic interest payments to investors until maturity, when the principal amount is repaid. Option A is incorrect because floating-rate instruments have interest payments that adjust based on a reference rate and are less common for long-term sovereign debt. Option B is incorrect because zero-coupon instruments do not make periodic interest payments and are generally less common among longer-term sovereign debt securities.\"\n    }\n  }\n}\n<\/script>\n\n\n\n<p class=\"wp-block-paragraph\">National governments issue bonds primarily for fiscal reasons. As a result, sovereign bonds denominated in local currency have different names such as US Treasuries, Japanese government bonds, gilts in the UK, and Bunds in Germany.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Treasury Securities<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">US government bonds that mature in less than 1 year are called T-bills. T-bills are pure discount (zero-coupon) bonds as they are issued at a discount to par. In contrast, capital market bonds such as T-notes (maturity of one to 10 years) and T-bonds (10 to 30-year maturity) are typical coupon-bearing bonds.<\/p>\n\n\n\n<div style=\"margin:28px 0;\">\n  <a href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\" style=\"display:block;width:100%;padding:12px 24px;border-radius:999px;background:#1a73e8;color:#ffffff;font-size:15px;font-weight:500;text-align:center;text-decoration:none;box-sizing:border-box;\">\n    Practice Sovereign Debt Questions with Our Free Trial.\n  <\/a>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Sovereign Bonds<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Sovereign bonds are issued by a country\u2019s central government and&nbsp;are usually unsecured obligations as they are not secured by collateral. However, a high credit rating is still possible for sovereign bonds denominated in local currency. These securities can either be fixed-rate bonds (pure discount, no interest) or coupon-paying bonds (periodic interest plus principal payment at maturity). Fixed-rate bonds are exposed to more interest rate risk than coupon-paying bonds because investors cannot reinvest the coupon payments at a higher interest rate in case of a sudden increase in rates.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The majority of trading in secondary markets is of sovereign bonds that were most recently issued. The most recently issued and most actively traded sovereign securities are referred to as <em><strong>on-the-run<\/strong><\/em>. Generally, as sovereign issues age, they tend to trade less frequently.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Floating Rate Bonds<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Floating-rate bonds reset interest rates periodically based on a reference rate such as the LIBOR. Thus, interest rate risk is minimized. Many national governments also issue inflation-linked bonds \u2013 also called linkers \u2013 whose cash flows are adjusted for inflation. Examples of such bonds are the&nbsp; Treasury Inflation-Protected Securities (TIPS), whose cash flows are based on the consumer price index (CPI).<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<h3 class=\"wp-block-heading\"><strong>Question<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Most sovereign debts that have a maturity longer than one year are:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Floating-rate instruments.<\/li>\n\n\n\n<li>Zero-coupon instruments.<\/li>\n\n\n\n<li>Coupon-bearing instruments.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Solution<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The correct answer is <strong>C<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Most fixed income instruments issued by national governments and have a maturity longer than one year are coupon-bearing instruments with stated periodic interest payments.<\/p>\n<\/blockquote>\n\n\n\n<div style=\"text-align:center;margin:35px 0;\">\n  <a href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\" style=\"display:inline-block;padding:15px 35px;border-radius:999px;background:#1a73e8;color:#ffffff;font-size:17px;font-weight:600;text-decoration:none;\">\n    Start Free Trial \u2192\n  <\/a>\n\n  <p style=\"margin:25px 0 0;font-size:16px;line-height:1.6;text-align:center;\">\n    Master CFA Level I Fixed Income concepts, including sovereign bonds, government securities, credit analysis, and debt markets with study notes, practice questions, and video lessons.\n  <\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>National governments issue bonds primarily for fiscal reasons. As a result, sovereign bonds denominated in local currency have different names such as US Treasuries, Japanese government bonds, gilts in the UK, and Bunds in Germany. Treasury Securities US government bonds&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[9],"tags":[],"class_list":["post-1779","post","type-post","status-publish","format-standard","hentry","category-fixed-income","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Securities Issued by Sovereign Governments | CFA Level 1<\/title>\n<meta name=\"description\" content=\"Learn about sovereign bonds, including T-bills, notes, and benchmark bonds. 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