The U.S. government provides its own bonds from the treasury and from a number of federal government firms. Those developing in less than one year are called T-bills. Bonds that grow in one to ten years are T-notes, and those that take more than 10 years to develop are treasury bonds. In many cases, you don't need to pay state or local earnings taxes on the interest they make.

Munis finance things like health centers, schools, power plants, streets, workplace buildings, airports, bridges and the like. Municipalities typically release bonds when they need more cash than they gather through taxes. The advantage about municipal bonds is that you don't have to pay federal income taxes on the interest they earn.

While business bonds are a greater danger than government bonds, they can earn a lot more cash. There's also a much larger selection of corporate bonds. The drawback is that you do have to pay federal earnings tax on the interest

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