Bonds are a type of debt security where the US government and their local branches can borrow money from their citizens. In return investors who purchase bonds usually earn a rate of return from the entity that issued them.
Although bonds can legally be issued through a number of places, not all bonds are created equal. The most safe and secure bonds are US Savings Bonds. They are legally issued from the US Treasury and have been an easy method of investment for decades. They have the muscle of the US Treasury behind them, are a low principal risk investment, and have a guaranteed rate of return.
However, there are other government entities that can legally issue bonds. In general, cities, counties, school districts, municipal utility districts, hospital districts, institutions of higher education, certain state agencies, and nonprofit organizations created to act on behalf of a governmental entity can issue bonds. Each bond is unique, and if a bond is not issued from the US Treasury then it is not a US Savings Bond.
Additionally, corporations can also legally issue bonds to generate cash for their cash strapped companies. Corporate bonds tend to be listed on the exchange (I.E. MarketAxess) and the interest payment tends to be considered taxable income. If you are researching to purchase a corporate bond, it is important to know that in comparison to government issued bonds, corporate bonds have higher risk on default.
Because of the higher principal risk involved with corporate bonds, these types of investments tend to offer a higher rate of return then government issued entities. The gamble of corporate bonds depends on current market conditions, the history and rating of the issuing corporation, and the governments to which the bond issuer is being compared. Before purchasing any type of legally issued bond, make sure to do your homework and know of the risks involved.
