investing guide

Types of Bonds

bond types

There are basically four main types of bonds.

(1.) Treasury Securities - These are United States government securities that are a large source of funds for the government. Since the United States government is unlikely to default on these securities, this type of investment is considered extremely safe.

(2.) Agency Bonds - Are similar to treasury securities, but have a slightly higher risk/reward potential. They tend to relate to Federal Agencies supporting such things as housing, the postal service, and other government related programs.

(3.) Municipal Bonds - These are bonds offered by towns, cities, and local agencies.

(4.) Corporate Bonds - Are a large source of corporate borrowing. These bonds tend to come with higher risk, but also offer a possible higher reward. Generally speaking it is considered wiser to invest in bonds that have at least a "B" or higher rating by Moody's.