G7 Bond

What Is a G7 Bond?

A G7 Bond is a government bond issued by a member nation of the Group of Seven (G7). The G-7 countries are all developed economies with very highly-rated sovereign debt and so these bonds are considered to be among the world's safest investments. G-7 countries include the U.S., U.K. Canada, Japan, Italy, France, and Germany.

Key Takeaways

  • A G-7 bond is sovereign debt issued by a Group of Seven country, including the United States, United Kingdom, Italy, France, Canada, Japan, and Germany.
  • As large, developed economies, bonds issued by these governments are considered very low-risk and safe-haven investments.
  • The G-7 itself is not a formal political or economic body and so does not issue bonds by itself as a bloc.

Understanding G7 Bonds

G7 Bonds are issued by the governments of Canada, France, Germany, Italy, Japan, the United States or the United Kingdom, the nations which comprise the G7. Such bonds can be purchased individually or bundled together in the form of a bond fund. In some cases, G7 Bonds are available to retail investors in the form of mutual funds. Because the member nations of the G7 are industrialized, developed nations which collectively represent a large portion of the global economy, bonds issued by G7 nations are seen as stable, low-risk investments.

Following the economic crises of the late 2000s, G7 bonds rose in popularity among investors because of their overall economic stability. Bonds issued by the G7 are government-backed bonds. Bonds issued by the U.S., for instance, are backed by the U.S. Treasury. Investors frequently seek to add G7 bonds to their investment portfolios as stabilizing investments, providing a certain degree of security, high liquidity and slow but steady growth over time.

The G-7 was formerly the Group of Eight (G-8), until Russia was expelled due to its illegal annexation of Crimea.

G7 Bonds and the Development of the G7 and G20

The G7 was established in the 1970s as a forum for the world’s foremost industrialized economies.

The G7 meets annually in a summit held in an alternating member country. The 44th annual G7 Summit, for instance, was held in June 2018 in Quebec, Canada. The 45th annual G7 Summit was hosted by France in 2019. The 46th G7 Summit was canceled in 2020 due to the COVID-19 pandemic.

Leaders from each of the G7 nations convene at each year’s summit to discuss and resolve global economic problems, including looming financial crises, commodity shortages and global economic growth.

Initially formed in 1975 as the Group of Six, comprising France, Germany, Italy, Japan, the U.S. and the U.K., Canada was invited to join a year later to establish the Group of Seven. Since 1981, the European Union has been represented at the annual G7 Summit, although as a non-enumerated member.

In 1998, Russia was added to the membership, establishing the forum as the Group of Eight. Russia remained a member nation until 2014, when the nation's membership was suspended after Russia's annexation of Crimea.

Following on criticism that the G7 does not sufficiently represent enough of the global economy, particularly regarding emerging markets, a larger forum known as the G20 was established in 1999 to provide a forum for other nations, including Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the European Union to join the G7 nations in an official capacity to promote global financial stability. Since 2011, the G20 has met annually. 

Article Sources

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  1. S&P Dow Jones Indices. "S&P G7 Sovereign Bond Index." Accessed Dec. 14, 2020.

  2. L'Elysee. "G7 France." Accessed Dec. 14, 2020.

  3. CNN. "Trump Postpones G7 Summit Until After U.S. Election." Accessed Dec. 14, 2020.

  4. Federal Government of Germany. "The History of the G7." Accessed Dec. 14, 2020.

  5. Council on Foreign Relations. "The Group of Twenty." Accessed Dec. 14, 2020.

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