Question

The yields on government bonds are usually less than yields on corporate bonds of similar maturity because: a. Corporate bonds have a shorter maturity than government bonds b. Government bonds are less risky than corporate bonds c. Government bonds are riskier than corporate bonds d. Corporate bonds have a longer maturity than government bonds

Answer 1

Government bonds are less risky than corporate bonds

Since corporate bonds have a higher risk of default, corporate bonds are riskier than government bonds. Since government bonds are issued by national governments, they are backed by the ability to tax its citizens and print money. All debt issued by the U.S. government is regarded as extremely safe, often referred to as “risk-free” securities, as is the debt of many stable countries.