Debt securities that provide predictable income streams and often serve as stabilizing elements in diversified portfolios.
When you purchase a bond, you're essentially lending money to the issuer for a specified period in exchange for regular interest payments (coupons) and the return of your principal when the bond matures.
Issued by national governments and considered among the safest investments, particularly those from economically stable countries.
Issuers
National governments
Typical Terms
3 months to 30 years
Risk Level The relative risk of loss of principal compared to other bond types.
Low (for stable countries)
Liquidity
Very high
Tax Benefits Potential tax advantages from holding this type of bond.
Taxable at federal level
Yield Range (2023) The typical range of annual returns for this type of bond in 2023.
3.8% - 5.2%
Notable Examples
US Treasuries, German Bunds
Best For
Conservative investors seeking capital preservation and steady income
Market Size
Largest segment of the global bond market
Key Feature: Backed by the full faith and credit of the issuing government
Did you know? Treasury bonds from different countries can have dramatically different yields based on the issuing government's credit rating and economic stability.
Issued by state and local governments to fund public projects like schools, highways, and utilities.
Issuers
State/local governments
Typical Terms
1 to 30 years
Risk Level The relative risk of loss of principal compared to other bond types.
Low to moderate
Liquidity
Moderate
Tax Benefits Potential tax advantages from holding this type of bond.
Often tax-exempt at federal level
Yield Range (2023) The typical range of annual returns for this type of bond in 2023.
3.0% - 5.5%
Notable Examples
New York City GO bonds
Best For
Tax-sensitive investors in higher tax brackets
Market Size
Significant market in the US, less common internationally
Key Feature: Tax advantages make them attractive for high-income investors
Did you know? Many municipal bonds are tax-exempt at the federal level, making them particularly attractive for investors in high tax brackets.
Issued by companies to raise capital for operations, expansions, or acquisitions.
Issuers
Corporations
Typical Terms
1 to 30 years
Risk Level The relative risk of loss of principal compared to other bond types.
Moderate to high
Liquidity
Moderate to high
Tax Benefits Potential tax advantages from holding this type of bond.
Fully taxable
Yield Range (2023) The typical range of annual returns for this type of bond in 2023.
4.5% - 9.0%
Notable Examples
Apple Inc. bonds, Microsoft bonds
Best For
Investors seeking higher income who can tolerate more risk
Market Size
Second largest segment of the global bond market
Key Feature: Higher yields to compensate for increased risk compared to government bonds
Did you know? Corporate bonds with higher yields typically come with higher risk, as they compensate investors for taking on additional credit risk.
Bonds secured by pools of mortgage loans.
Issuers
Financial institutions
Typical Terms
15 to 30 years
Risk Level The relative risk of loss of principal compared to other bond types.
Moderate
Liquidity
Moderate
Tax Benefits Potential tax advantages from holding this type of bond.
Fully taxable
Yield Range (2023) The typical range of annual returns for this type of bond in 2023.
4.2% - 6.5%
Notable Examples
Fannie Mae, Freddie Mac securities
Best For
Sophisticated investors seeking diversification and higher yields
Market Size
Significant market particularly in the US financial system
Key Feature: Payments derive from underlying mortgage payments, creating unique prepayment risks
Did you know? Mortgage-backed securities became infamous during the 2008 financial crisis due to their role in the subprime mortgage collapse.
Issuer sells bonds to raise capital, promising to pay interest and return principal at maturity.
Bondholders receive regular interest payments (coupons) throughout the bond's term.
At the end of the term, the issuer returns the principal amount to investors.
Click on a bond type above to explore its characteristics