There is virtually no chance of default. Maturity periods vary. Treasury Notes mature in 2 to 10 years. Several federal agencies, such as the Farm Credit System, also issue bonds to meet their money needs. These bonds are nearly as secure as U.S. government securities and often will pay slightly higher interest.
Municipal bonds are debt obligations of state and local governments.
Funds generated by these bonds are used to finance construction or repair of highways, hospitals, schools or other public facilities. Interest earned from municipal bonds is exempt from federal income taxes and from state and local income taxes in the state in which they were issued. Municipal bonds will typically carry a lower interest rate than other bonds, but investors in higher income tax brackets may still find the municipals attractive. Opportunities to buy and sell some municipal bonds are restricted if few bonds were sold for a small project in a limited geographic area. Consider buying well-known issues of larger state and local governments if you anticipate selling the bonds prior to maturity.