Types of Bonds

There are a spectrum of bonds, ranging from government to corporate. Bonds can differ in seller, buyer, risk, and purpose. Here are the main types of bonds:

U.S. Treasury Bonds: This type of government bond issues bills, notes, and bonds, by the U.S. Treasury Department for funding operations in the U.S. Federal Government. Treasury Bills have a maturity rate of 1 year, Treasury Notes have a maturity rate of 2-10 years, and Treasury Bonds have a maturity rate of over 10 years. These are known as the safest and one of the most popular types of bonds, as the yield is promised by the federal government. Consequently, this type of bond generally has a low return.

Agency Bonds: These are bonds issued by companies sponsored by the government, such as Fannie Mae and Freddie Mac, which are guaranteed by the government.

Municipal Bonds: These types of government bonds are issued by local governments or cities to raise money for the public good (fixing roads, building schools, etc). They are generally riskier than federal government bonds, but less risky than corporate bonds. 

Corporate Bonds: These are bonds issued by companies for the purpose of increasing capital. If a company has a higher credit quality, it is able to issue bonds at a lower rate. Though they vary in risk, these are generally high-risk and high-reward investment options.