Understanding Types of Bonds: What They Are and How They Work

This bond is issued by the U.S. government to raise funds for public projects or to manage debt. It's generally considered safe because governments can tax citizens to repay bondholders. 

This type of bond is issued by corporations to raise capital for purposes such as expansion, acquisitions or day-to-day operations. Corporate bonds typically offer higher interest rates than government bonds but also carry higher risks of default. This higher risk is because if something happens to the corporation, like a bankruptcy, they aren’t able to pay back the money you lent.

Municipal bonds are issued by local governments, municipalities or agencies to finance public projects such as schools, roads or utilities. These differ from U.S. Treasury bonds in that you are investing in a smaller, more localized area. Municipal bonds often offer tax advantages and are generally considered relatively safe investments.

These bonds are issued by government-sponsored enterprises (GSEs), such as Fannie Mae, Freddie Mac and the Federal Home Loan Bank, to fund specific public initiatives, such as housing or infrastructure projects. These bonds are considered to have slightly higher risk than U.S. Treasury bonds but typically offer higher yields.

These are a type of government bond issued by the U.S. Department of the Treasury as a means of borrowing money from individual investors. They’re often used by investors for educational expenses, retirement savings or as gifts to family members. They are considered low-risk investments and typically have fixed interest rates, meaning the interest rate remains constant throughout the bond's term.

Certificates of deposit are offered by banks, including KeyBank, which pay a fixed interest rate over a specified term. While not technically bonds, CDs are low-risk, interest-bearing investments that can be an alternative to traditional bonds for conservative investors.