Because governments have the power to tax, it is presumed that they can pay interest and principal in the future. Municipal bonds are generally tax-exempt. This allows the governmental unites to pay a lower rate of interest on the bonds, thus lowering their cost of borrowing. The government pays the interest on these bonds, but it builds the interest into the redemption price rather than sending checks to the investors on a regular basis. Savings bond s are attractive because they are easy to obtain and there is virtually no risk of default.
Most investors tend to hold long-term savings bonds.
Like the United States, many other nations issue bonds, although they are generally available only in large denominations. Pension funds, insurance companies, and large corporations with large ash reserves purchase these bonds. The risk of international bonds is harder to determine than other types of bonds, so investors have to choose carefully. International bond s are unique in that they make coupon and principal payments in another currency but the investor doesn't know how that currency will compare to the dollar in the future. Treasury notes are US government obligations with maturities of 2 to 10 years, which Treasury bonds have maturities ranging from more than 10 to as many as 30 years.