The Key Difference Between Government and Corporate Bonds

Government Bonds vs Corporate Bonds
Feature	Government Bonds	Corporate Bonds
Definition	Bonds issued by the government to finance public spending and debt.	Bonds issued by companies to raise capital for business operations or expansion.
Issuer	Central or local government entities.	Private or public corporations.
Risk Level	Generally low risk due to government backing (considered safer).	Higher risk as it depends on the company’s financial health.
Return	Lower interest rates reflecting lower risk.	Higher interest rates to compensate for greater risk.
Maturity	Ranges from short-term to long-term, often very long durations.	Varies from short to long-term depending on company’s needs.
Tax Benefits	Interest income may be tax-exempt or have favorable tax treatment.	Generally taxable interest income.
Market Liquidity	Highly liquid, especially government securities of major economies.	Liquidity varies; some corporate bonds are less liquid.
Purpose	To fund government projects, infrastructure, and budget deficits.	To finance business growth, acquisitions, or debt refinancing.
Credit Rating	Usually high credit rating, often considered risk-free benchmarks.	Varies widely; credit rating depends on company’s financial status.