Government bonds

Government bonds, as the name implies, represent debts issued by governments. As government bonds are obligations of the government, they are viewed as one of the safest of all investments. Because of this unique degree of safety, coupon rates are generally lower than other widely traded debt instruments, such as corporate bonds. The biggest government bonds issuer currently is the United States.

Corporate bonds

Corporate bonds represent debts issued by the relevant corporate. These bonds are fully taxable, and they are generally issued in maturities ranging from five years to about 30 years. Typically, income is paid twice a year. It is commonly perceived that corporate bonds carry more risks because of the risk of company bankruptcy. Therefore, the credit quality of the company becomes an important gauge for investors to see how reliable the company is in repaying its debt.

Zero-coupon bonds

Zero-coupon bonds do not pay income during the life of the bonds. Investors will buy the bonds at a discount to the face value, and upon maturity, they will receive the full face value of the bond. For example, a five-year zerocoupon bond with a face value of $10,000 may be issued at $8,000. If you subscribe for this bond, you will pay $8,000 and receive $10,000 after five years. Although you will not receive income, they are factored into the price of the bond upon maturity.