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Municipal bonds are debt obligations issued by states, cities, counties and other government entities to build projects for public use such as schools, highways, and hospitals. Income from municipal bonds may be exempt from certain taxes. Municipal Bonds often have a lower rate because of tax advantages.

Government agency bonds are considered among the safest of investments and carry AAA ratings. These bonds are securities issued by institutions related to the federal government and U.S. government sponsored enterprises (GSE). Agency debt was created to reduce borrowing costs for different sectors of the economy, such as housing, student loans and agriculture.

Treasury debt is a direct obligation of the U.S. Treasury and has the highest possible credit rating. Payment of principal and interest is considered risk-free. Maturities range from 30 days to 30 years. Treasury bills have maturities of less than 12 months and pay interest only at maturity, while bonds and notes pay interest semi-annually. All interest is tax-free at the state and local level, and all issues have an active secondary market. Treasuries with long maturities have more potential for inflation and credit risk.

Corporate bonds are debt obligations issued by private and public corporations. Purchasers of corporate bonds loan money to the issuer. The issuer promises that the principal amount will be repaid on a specified maturity date, and that a stated rate of taxable interest will be paid until maturity. Corporate bonds are usually rated by established rating agencies to provide comparisons between various issuers and yield. There is more credit risk with corporate bonds, though this usually means that the bondholder will be paid a higher interest rate.