The economic recovery bonds offered by the government are meant to provide monetary assistance to financial institutions in their functioning of lending funds to businesses and the people. This form of stimulus is being offered to make way for a stronger economy. In fact, it has been seen that the amount of funds advanced through this channel is higher than the normal amount of money advanced as loans. To be more specific, the amount of money advanced through this channel is almost equal to the cumulative amount of money lent out in all the other forms of financial assistance.
The investors who buy economic recovery bonds get some or the other form of benefit in exchange. The only difference is that here the stimulus package is being offered to creditors on behalf of the government in order to keep them from going bankrupt. So, you can say that these bonds serve as a safety net for creditors. At the same time, they get money from the government's usual spending programs.
The bond market has been affected by the recession in a negative manner. The fall in the interest rates has been the biggest blow to the bond market. However, things look rosy now since the Federal Reserve is pumping in enough money to keep the interest rates low. Hence, it is not surprising to see that the bond market is bouncing back.
When economic recovery bonds are issued, they often times will be backed by some type of assets such as real estate, gold and silver. Usually, the issuing authority will take care of the repayment of the bonds by purchasing the assets on the market. There is an opportunity to earn some profit on the sale of these bonds. However, the bonds will have to be redeemed at a later date when the prices rise again.
There is another positive side to the bond market. Investors often make money when they purchase bonds at low interest rates. The price of the bonds will likely to increase when the economy recovers and the interest rates start climbing. At this point, the bond market will become flooded with investors who want to take advantage of the rising prices. It will also be possible for investors to sell bonds early and claim a profit.
If you wish to take part in the bond market, you may want to purchase economic recovery bonds. You will need to do your research well though and ensure that you are investing with your head not your heart. Always check that you are getting the full return on your investment. Remember to never invest more than you can afford. Once you have done your research, you will be able to choose from various types of bonds that are available and make an informed decision.