Looking at the bond issuer

The promise to repay is worth only as much as the credibility
of the entity making the assurance. If an entity becomes
insolvent, it may be unable to pay even its guaranteed obligations.
For this reason, the most important characteristic of
a bond is the issuing entity. The following types of entities
issue bonds:

n U.S. Treasury Department: This debt is backed by the
full faith and credit of the U.S. government and is literally
the safest investment in the world.

n Other U.S. government agencies: From time to time,
state and local government entities and agencies issue
bonds to finance their projects and agendas. Examples
include Federal National Mortgage Association (FNMA)
Bonds and Student Loan Marketing Association (SLMA)
bonds. Most (but not all) of these obligations are backed
by the full faith and credit of the U.S. government. You
need to ask the issuer to find out whether a bond is guaranteed
by the U.S. government.

n Corporations: Corporations issue debt to finance their
operations. They offer higher interest rates than government
obligations because they’re considered riskier.

n State and local governments: These agencies issue
bonds to finance government projects and activities and
use tax revenue or revenues generated by the project or
activity financed to retire the bonds.

n Foreign governmental entities: These bonds are guaranteed
by the governments of issuing countries, and they
often offer a higher rate of return than U.S. obligations.
However, they may be much riskier, depending upon the
political climate and solvency of the issuing country.