Explanation:

Government security is a tradable instrument issued by the Central Government or the State Governments. It acknowledges the Government’s debt obligation (to raise money from the market for various purposes). Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more). Besides providing a return in the form of coupons (interest), Government securities offer the Maximum safety as they carry the Sovereign’s commitment for payment of interest and Repayment of principal.

Statement 1: There are two types of bonds:

Fixed Rate Bonds – These are bonds on which the coupon rate is fixed for the entire life of the bond. Most Government bonds are issued as fixed rate bonds.

Floating Rate Bonds – Floating Rate Bonds are securities which do not have a fixed coupon rate. The coupon is re- set at pre-announced intervals (say, every six months or one year) by adding a spread over a base rate. These are issued by RBI.

Statement 2: Cash Management Bills (CMBs), are a relatively new short-term instrument to meet the temporary mismatches in the cash flow of the Government. The CMBs have the generic character of T-bills but are issued for maturities less than 91 days.

Statement 3: Treasury bills or T-bills, which are money market instruments, are short term debt instruments issued by the Government of India and are presently issued in three tenors, namely, 91 day, 182 day and 364 day.