Treasury Bonds vs Corporate Bonds
Compare US Treasury bonds and corporate bonds — credit risk, yield, and tax treatment.
Overview
Treasuries are issued by the US government and considered the safest fixed-income asset. Corporate bonds carry credit risk and pay a higher yield to compensate. Treasuries are also exempt from state income tax — a meaningful edge in high-tax states.
Choose Treasury Bonds when...
Choose Treasuries (or Treasury-only funds) for the safest portion of your portfolio, or in a taxable account in a high-tax state.
Choose Corporate Bonds when...
Add corporate bonds (usually via a total-bond-market or investment-grade fund) for higher yield and broader diversification within fixed income.
Our Verdict
For the safe portion of your portfolio, Treasuries are unmatched — zero credit risk and state tax exempt. For broader fixed-income exposure, a total-bond-market fund mixes Treasuries, agency MBS, and investment-grade corporates. Avoid concentrating in junk bonds unless you understand the equity-like risk.
Frequently Asked Questions
What is the difference between Treasury Bonds and Corporate Bonds?
Treasuries are issued by the US government and considered the safest fixed-income asset. Corporate bonds carry credit risk and pay a higher yield to compensate. Treasuries are also exempt from state income tax — a meaningful edge in high-tax states.
When should I choose Treasury Bonds over Corporate Bonds?
Choose Treasuries (or Treasury-only funds) for the safest portion of your portfolio, or in a taxable account in a high-tax state.
When should I choose Corporate Bonds over Treasury Bonds?
Add corporate bonds (usually via a total-bond-market or investment-grade fund) for higher yield and broader diversification within fixed income.
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