TYPES OF BONDS

US Treasury Bonds

The most important bonds are the U.S. Treasury bills, notes, and bonds issued by the Treasury
Department. They are used to set the rates for all other long-term, fixed-rate bonds. The Treasury
sells them at auction to fund the operations of the federal government.

These bonds are also resold on the secondary market. They are the safest, since they are
guaranteed by the United States government. That means they also offer the lowest return. They
are owned by almost every institutional investor, corporation, and sovereign wealth fund.

Savings Bonds

Savings bonds are also issued by the Treasury Department. These bonds are meant to be
purchased by individual investors. They are issued in low enough amounts to make them
affordable for individuals. I bonds are like savings bonds, except they are adjusted for inflation
every six months.

Agency Bonds

Quasi-governmental agencies, like Fannie Mae and Freddie Mac, sell bonds that are guaranteed
by the federal government.

Municipal Bonds

Municipal bonds are issued by various cities. They are tax-free but have slightly lower interest
rates than corporate bonds. They are slightly more risky than bonds issued by the federal
government. Cities occasionally do default.

Corporate Bonds

Corporate bonds are issued by all different types of companies. They are riskier than
government-backed bonds, so they offer higher rates of return. They are sold by the
representative bank.