What Are Interest Bonds?

Interest bonds are any bond issued either by the US Treasury, a government entity within the federal government, or even practically any corporation.  A bond is simply a written agreement to loan money to any of the parties above in exchange for repayment at a future day.  What makes investing in bonds profitable and known as interest bonds is that the issuer of the bond also pays the buyer interest.  Interest bonds are loans by individuals, or in some cases groups of individuals such as in mutual bond funds, who essentially loan money to either the government or a corporation, depending on the bond type.  Investing in bonds is good for the investor as the bonds not only must be repaid but additionally interest is paid on top of that amount.  Investing in bonds differs from investing in a company stock in that you do not own a share or vested interest in the company or government, but rather are simply lending them money.

Government Interest Bonds

Government interest bonds, referred to as Treasury bonds when issued by the US government, have been in existence since the First World War  Then as now they have provided the necessary cash flow to the government to operate on a daily basis or fund extra expenditures such as war.  Government bonds come in many forms but they all have two things in common: they pay interest to their bearers and that interest is not taxed by the federal government.   This is one of the many reasons why investing in bonds is wise.  Not only is your return all but guaranteed by the richest nation on earth, but your interest will not be held against you as earned income when you file your taxes.

Related posts:

1. What are Government Bonds?
2. What Are Treasury Bonds?
3. What Are Agency Bonds?
4. What Are Tax Free Bonds?
5. What Is The Bond Rate?