Do government bonds compound ?

Not really but if you invested in zero coupon bonds or strips then you in effect have compounding as the cash flow only occurs at maturity.

No they don't compound. How could they? There is a coupon (or face value of interest) wich is per annum. This may be split into more than one period (usually half yearly). But that is just the annual coupon divided by the interval. Of course the interest accumulates daily so once the interest has been paid thne the daily interest starts to accumulate daily (coupon divided by 365) and on a sale or purchase this will be included. If the accumulated days are converted to a monetary figure and added to the trade price then this is called the 'dirty' price. Otherwise it is the 'clean' price plus (or minus) days interest. To compound interest or dividends it has to be reinvested. This would usually be too expensive. In the case of company dividends there are sometimes SCRIP or DRIP reinvestment schemes which are sometimes free or in any case cheap whereby dividends can compounded. The other way is in a bond fund where there will be large amounts of interest, collectively, and this interest could be cheaply re-invested by the fund managers and therefore, again, compounded.

No, they do not.

United Stated Treasury bonds (maturities of 10 years and greater) pay a semiannual coupon that you will receive every year. The coupon you will receive will be based upon what price you bought the bond at.

So, if you bought your treasury bond at (hypothetically) 105-25 and it was yielding 2%, your annual coupon would be 1% of that 105-25 every January and June. It depends on when the bond was issued as to when you will get your coupon. And of course, when the bond reaches maturity, you will get the stated par value of the bond back.

They do not appear to make very shrewd funding choices. But many businesses fell into the greed trap in 2008 and thought they'd make significant cash in hedge dollars and loan derivatives.

To confuse things, they may have 3 yields to consider ,e.g. a £100 gilt (with 3 years to redemption ) may have a 5% coupon (paying £5 p.a.) but trade at £105 meaning the buyer will earn 4.76% p.a. or 3.33% p.a. if kept to redemption.

No they can not compounded because there is no factor of LRP and DRP in that securities. and their interest rate driven from a bench mark given by central bank.