What is the difference between government and corporate bonds?

Government bonds and corporate bonds are two types of bonds that differ in their issuer, risk profile, and interest rates.

Government bonds are issued by the government to finance its budget deficit or other expenses. In India, government bonds are also known as "sovereign bonds." These bonds are considered to be among the safest investments because the government is considered to have the ability to pay back its debt. Government bonds are usually issued with longer maturities and offer lower interest rates than corporate bonds.

On the other hand, corporate bonds are issued by corporations to raise capital for their business operations. Corporate bonds are generally considered riskier than government bonds because there is a risk that the corporation may default on its debt obligations. Corporate bonds generally offer higher interest rates than government bonds to compensate investors for the additional risk. The interest rate on a corporate bond is influenced by factors such as the company's credit rating, financial performance, and economic conditions.

In summary, government bonds are issued by the government and are generally considered to be safer than corporate bonds, while corporate bonds are issued by companies and are generally riskier but offer higher interest rates.