Which bond type is backed by the full faith and credit of the U.S. government?

The bond type that is backed by the full faith and credit of the U.S. government is U.S. savings bonds. These bonds are issued by the federal government, specifically the U.S. Department of the Treasury, and therefore carry the highest level of credit quality. This full faith and credit guarantee means that the government is committed to repaying the debt, making these bonds virtually risk-free for investors.

U.S. savings bonds are unique in that they are often designed for individual investors and can be purchased at a low initial investment. The interest earned is exempt from state and local income taxes, adding to their appeal. Furthermore, they can be cashed in after a certain period, making them a flexible investment option.

In contrast, corporate bonds are issued by private companies and carry a risk level that varies based on the issuing company's creditworthiness. Agency bonds are issued by government-sponsored enterprises (GSEs) and while they typically have a high credit rating, they may not have the same full guarantee as U.S. savings bonds. Municipal bonds are issued by state and local governments and provide tax benefits but carry a risk that is not backed by the U.S. government. Therefore, U.S. savings bonds are distinct in their government backing, ensuring