How are government debt securities categorized?

Government debt instruments are commonly categorized according to their maturity:

• Government bill – A short-term discount debt instrument issued by a central government with a maturity of up to one year for liquidity and cash management purposes and the financial instrument most commonly used in the conduct of open market operations by the central bank;
• Government note – A capital market government debt instrument paying fixed-interest with a minimum maturity of two years and, depending on the issuing government, up to ten years for intermediate/medium-term; and
• Government bond – A long-term coupon-bearing capital market debt instrument issued by a national government for its long-term financing requirements typically with a maturity of more than 10 years and up to 30 years – depending on the nature of the issue and the issuing government.

A sovereign bond is a government debt security that is issued in foreign capital markets commonly in a foreign currency (i.e., Eurocurrency), although it may be issued in the issuer’s domestic currency.  Whereas both government bonds and sovereign bonds of a nation are included in that country’s national debt, sovereign debt is part of the external debt of the country.  Government bonds are chiefly bought and held by domestic investors, while sovereign bonds are held mostly by a relatively small group of international institutional investors.  However, all government capital market debt instruments, regardless of the issue’s currency or maturity, are collectively commonly called “government bonds”.