| Definition |
Debt issued by a national government to finance public spending and obligations. |
Debt issued by companies to raise capital for business operations or expansion. |
| Issuer |
Central government or related public sector entities. |
Private or public corporations. |
| Purpose |
Fund government projects, budget deficits, infrastructure, social programs. |
Finance business growth, capital expenditures, acquisitions, or operations. |
| Risk Level |
Generally lower risk due to government backing; risk depends on country creditworthiness. |
Higher risk as repayment depends on company’s financial health. |
| Credit Rating |
Rated by agencies considering country’s economic & political stability. |
Rated based on company’s financial performance and industry outlook. |
| Default Risk |
Usually low but possible in weak economies or crisis situations (sovereign default). |
Higher risk of default, especially for companies with poor financials. |
| Interest Rates |
Typically lower interest rates due to lower risk perception. |
Higher interest rates to compensate investors for increased risk. |
| Tenor (Maturity) |
Can range from short-term (treasury bills) to very long-term (30+ years bonds). |
Varies widely; usually medium to long term depending on company needs. |
| Currency |
Issued in domestic currency or foreign currency (Eurobonds). |
Issued in domestic currency or foreign currency, depending on company and market. |
| Tax Treatment |
Interest payments may have tax exemptions or special treatments. |
Interest payments are generally tax-deductible expenses for the company. |
| Investor Base |
Wide and diverse including central banks, sovereign wealth funds, retail investors. |
Institutional investors, mutual funds, hedge funds, retail investors. |
| Liquidity |
Usually highly liquid, especially government bonds of stable countries. |
Liquidity varies widely based on company size and credit rating. |
| Security |
Mostly unsecured but backed by government’s taxing power. |
May be secured by company assets or unsecured. |
| Regulation |
Subject to sovereign regulations and international agreements. |
Regulated by corporate laws and securities regulators. |
| Examples |
U.S. Treasury Bonds, Indian Government Securities, UK Gilts. |
Corporate bonds issued by Apple, Tesla, or other companies. |
Sovereign Debt vs Corporate Debt