Types of bonds
Like many people, companies and governments sometimes need to borrow money to fund a project or to grow. That means you have different bond issuers to choose from, including corporations, the US Treasury, cities and states, as well as federal, state and local government agencies. Most bonds have a face or par value, or issue price of $1,000 per bond, but you often must buy more than one.
|
Type |
Terms |
Issuer |
Risk of default |
Tax treatment |
|---|---|---|---|---|
|
Corporate |
1 to 100 years |
Publicly traded companies |
Variable |
Taxable |
|
Municipal |
1 to 50 years |
States, counties and cities |
Variable |
Tax-exempt, though may be subject to alternative minimum tax |
|
Agency |
1 to 20 years |
US and state government agencies |
Limited |
Some are taxable and others tax exempt |
|
Treasury notes |
2, 3, 5 and 10 years |
US Treasury |
Very low |
Federally taxable only |
|
Treasury bills |
4, 13 and 26 weeks |
US Treasury |
Very low |
Federally taxable only |
US savings bonds
You may also buy US savings bonds, which are issued by the federal government and pay interest on the amount you invest. They're sold in smaller denominations than Treasury notes or bills, and are sometimes available for purchase where you work. You can also buy them directly from the government through a program known as Treasury Direct. But they aren't negotiable, which means you can't sell them in the marketplace as you can other bonds.
