Government bonds are bonds issued by the government in order to raise funds from the public. The government borrows money, and it is responsible for making interest payments, as well as for repaying the principal when the bonds mature.
Since the United States government issues them, treasury bonds are considered risk-free. It is assumed that the government always honors its commitments and has the capability of generating more U.S. dollars to meet its bond payments.
There are various types of bonds:
Treasury Bonds are bonds issued for a period of 30 years, also called long-term bonds. These usually bear higher interest than other government bonds.
Treasury Notes are bonds issued with maturation periods of 2, 5 and 10 years.
Corporate Bonds are Bonds Issued by Companies. These bonds are considered riskier than government bonds.