GOVERNMENT BONDS AS AN INSTRUMENT OF ALTERNATIVE INVESTMENT
DOI:
https://doi.org/10.31734/economics2024.31.012Keywords:
domestic government bonds, alternative investments, risks, capital market, government securities, discount rateAbstract
The article discusses the increasing interest of Ukrainians in alternative investment methods, particularly government bonds (domestic government loan bonds). It compares domestic government bonds with traditional income methods like bank deposits and real estate purchases, concluding that alternative investment strategies if approached properly, can yield higher returns and offer greater flexibility. The article describes government bonds as a tool for public debt and outlines their characteristics, including reliability, liquidity, stable income, portfolio diversification, and affordability. The article analyzes the domestic government bonds market dynamics in 2023, noting significant growth compared to 2022 in the Ukrainian capital market. It also examines the structure of trading in financial instruments in the organized capital markets of Ukraine, finding that domestic government bonds accounted for the largest share (52 %) of the trading volume. The article indicates factors that led to a 33 % decrease in the placement of domestic government bonds in the primary market in 2023, attributing it to significant international assistance, an increase in the NBU's discount rate, and a desire to shift the debt structure in favor of long-term borrowing. The authors highlight the increasing popularity of foreign currency-denominated domestic government bonds as a hedge against inflation. Additionally, the article analyzes the distribution of outstanding domestic government bonds by categories of holders and by currency denomination, concluding that the NBU is the largest holder, legal entities hold a significant share, banks are active participants, and individuals' share is growing. It also notes that the volume of domestic government bonds denominated in foreign currency is 9 %. The article concludes by analyzing the rates on domestic government bonds under martial law, emphasizing the importance of carefully assessing investment goals, risks, and specific instruments before investing in domestic government bonds.
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