When you purchase any type of bond (government, convertible, callable, etc.), you are lending money to the issuer which may be a corporation, the government, a federal agency or any other entity. In return, the issuer promises to pay a specified rate of interest during the life of the bond. In India, the central government issues both: treasury bills and bonds or dated securities, while state governments issue only bonds or dated securities, which are called the state development loans. Since they are issued by the government, they carry no risk of default, and hence, are called risk-free gilt-edged instruments. 2. For a full discussion of the price of a security, see Treasury Bonds: Rates and Terms. When you buy a bond in TreasuryDirect, we withdraw the purchase price from the source of funds that you specify, which could be one of your bank accounts or your Certificate of Indebtedness (C of I).