Government Bonds
- Treasury Bonds (T-Bonds): Issued by the U.S. Department of the Treasury, they have maturities of 10 to 30 years and pay interest semi-annually.
- Treasury Notes (T-Notes): Also issued by the U.S. Treasury, with maturities of 2 to 10 years and semi-annual interest payments.
- Treasury Bills (T-Bills): Short-term securities with maturities of one year or less, sold at a discount and do not pay periodic interest.
- Municipal Bonds (Munis): Issued by states, cities, and other local government entities. They often have tax advantages, with interest typically exempt from federal income tax and sometimes state and local taxes.
Corporate Bonds
- Issued by corporations to raise capital for business activities. They can have varying maturities and credit ratings, and typically pay higher interest rates than government bonds due to higher risk.
Zero-Coupon Bonds
- Do not pay periodic interest. Instead, they are sold at a deep discount to their face value and pay the full face value at maturity. The difference between the purchase price and the face value represents the interest earned.
Convertible Bonds
- Corporate bonds that can be converted into a predetermined number of the issuer’s shares of stock. They offer the potential for capital appreciation in addition to interest payments.
Callable Bonds
- Bonds that can be redeemed by the issuer before their maturity date at a specified call price. This typically happens when interest rates fall, allowing the issuer to refinance at a lower rate.
Inflation-Protected Bonds
- Treasury Inflation-Protected Securities (TIPS): Issued by the U.S. Treasury, their principal value is adjusted based on changes in the Consumer Price Index (CPI). They provide protection against inflation.
Agency Bonds
- Issued by government-affiliated organizations (e.g., Fannie Mae, Freddie Mac). They are not backed by the full faith and credit of the U.S. government but are considered relatively safe.
Foreign Bonds
- Issued by foreign governments or corporations. They are subject to currency risk, as their returns can be affected by exchange rate fluctuations.
Junk Bonds (High-Yield Bonds)
- Corporate bonds with lower credit ratings, indicating higher risk of default. They offer higher yields to compensate for the increased risk.
Savings Bonds
- Issued by the U.S. Treasury, such as Series EE and Series I savings bonds. They are designed for individual investors and have unique tax advantages and redemption features.