Classifications of securities, as well as just securities, there are a great many. Let us consider in more detail the classification of securities by ownership. According to it, there are state and non-state securities. Non-state financial investments are investments in securities issued by joint-stock companies and commercial banks (stocks, certificates). Government securities are securities issued by the state, government agencies, local authorities (bonds, treasury bills).
All government securities, in essence, are debt securities. Nevertheless, each security issued by the state has its own name, for example, bonds of a domestic foreign currency loan, etc. Among other securities, government securities are characterized by a high level of reliability, minimized risk of loss of own funds and income on fixed capital, very favorable taxation (or even lack thereof).
The state can make up the budget deficit at the expense of the Central Bank, from the issue of money and through the issuance of securities. If the state uses the help of the Central Bank, the possibility of regulating the loan market is reduced. The issue of money introduces into the circulation means of payment that do not have real assets, which subsequently leads to inflation and interruptions in the country's monetary circulation. The issue of government securities is the most cost-effective way of financing the budget.
Government securities can also be used to finance public debt, and this is much preferable to raising funds through bank loans. Government bonds are much more liquid, and it is much easier for investors to sell them on the secondary market.
Sometimes government securities provide commercial banks with liquid assets. To do this, banks invest funds (most often from a reserve fund) in a part of government-issued securities. Government securities are also issued to finance programs that are implemented by local authorities. The state can give guarantees on debt obligations of organizations that, in the opinion of the state, deserve its support.
The issue of government securities may also be caused by the need to repay loans previously issued by the government. Sometimes the state has short gaps between revenues and expenses due to the discrepancy between the time of receipt of payments to the budget and uniform budget expenditures. Then the government again resorted to issuing government debt.
Some types of securities are designed to smooth out the unevenness of tax revenues. Owners of such securities may return them to the government back after some time or pay taxes to them.
Government securities of the Russian Federation reflect the specifics of our country, especially taxation, and, at the same time, are based on common principles for the existence and functioning of the securities market for different countries. In the Russian Federation, types of government securities are determined by the Bank of Russia and the Ministry of Finance of Russia. The most common of them: state short-term coupon-less bonds (GKO), domestic government foreign currency loan bonds - have been issued since 1993, federal loan bonds with fixed coupon income, state savings loan bonds have been issued since 1995, Bank of Russia bonds (OBR), etc. d.