Business and Personal Finance Dictionary

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• GOVERNMENT BOND
  
  The term government bond is used to describe all types of debt securities issued by the federal government, such as US Treasury bills, notes, bonds, and zero-coupon STRIPS. You can buy these bonds directly using a Treasury Direct account that you set up through a Federal Reserve Bank 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-taxes. The cash raised by the sale of Treasurys is used to finance a variety of government activities. Trading in the bonds also helps regulate the money supply and pay off the national debt. The main difference between bills, notes, and bonds is the length of their terms and their rates of return.
  
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