Short-Term Government Bonds

Definition ∞ Short-term government bonds are debt instruments issued by a nation’s government with a maturity of under one year. These debt securities represent a loan made to a national government, with a repayment period typically not exceeding twelve months. They are characterized by high liquidity and minimal credit risk, making them a preferred asset for maintaining financial stability. Investors receive periodic interest payments and the principal amount upon maturity.
Context ∞ Short-term government bonds are frequently cited as ideal reserve assets for fiat-referenced stablecoins due to their perceived safety and liquidity, which are crucial for maintaining the stablecoin’s peg. Regulators increasingly advocate for stablecoin issuers to hold a significant portion of their reserves in such highly liquid, low-risk instruments. Future regulatory frameworks will likely mandate specific allocations to these types of assets to enhance stablecoin reliability.