By purchasing a government bond, an investor lends money to the state and receives coupon income, with the principal repaid at maturity. The Ministry of Finance acts as the issuer, with placement typically conducted through auction.
Government securities are considered the least risky in their currency: the probability of state default in national currency is assessed as the lowest among all borrowers in the country. Therefore, their yield serves as a risk-free benchmark against which the risk premium for corporate issues is measured.
The absence of credit risk does not mean there is no risk at all. Government bond prices fall when market rates rise, and selling before maturity may result in losses. Additionally, currency-denominated securities do not protect against inflation and currency depreciation—they only guarantee repayment of the nominal value in the same currency, not preservation of purchasing power.