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  • The term government bond is used to describe the debt securities issued by the federal government, such as US Treasury bills, notes, and bonds. They're also known as government obligations.

    You can buy and sell these issues directly using a Treasury Direct account or through a broker.

    Treasurys are backed by the full faith and credit of the US government, and the interest they pay is exempt from state and local, though not federal, income taxes. The cash raised by the sale of Treasurys is used to finance a variety of government activities.

    Debt instruments issued by government agencies are also described as government bonds, or government securities, though they are not backed by the government's ability to collect taxes to pay them off.

    For example, bonds issued by the Government National Mortgage Association (Ginnie Mae) and the Tennessee Valley Authority (TVA) are government bonds.

  • Browse Related Terms: Agency bond, Fannie Mae, Freddie Mac, Government bond, Government National Mortgage Association (Ginnie Mae), Quasi-public corporation, Sallie Mae, Scripophily