How do bonds differ from Treasury bonds and municipal bonds?

Bonds, treasury bonds, and municipal bonds are all debt securities, but they differ in terms of who issues them and the purpose they serve.

Bonds are debt securities issued by corporations or government entities to raise capital. They have a fixed term and pay a fixed interest rate (coupon rate) until maturity, at which point the principal is returned to the bondholder.

Treasury bonds are issued by the US government to finance its operations and fund projects. They are considered to be among the safest investments because they are backed by the full faith and credit of the US government. Treasury bonds have a fixed term and pay interest every six months until maturity, at which point the principal is returned to the bondholder.

Municipal bonds, also known as “munis”, are issued by state or local governments to fund public works projects such as schools, highways, and hospitals. Municipal bonds have a fixed term and pay interest every six months until maturity, at which point the principal is returned to the bondholder. One of the main advantages of investing in municipal bonds is that they are exempt from federal income tax and, in some cases, state and local taxes.