Credit risk from bonds

Are agency bonds more risky than treasuries?

Because agency bonds have more credit risk (that is, the risk that they will fail to make timely interest payments or even, in a worst-case scenario, fail to repay principal) than Treasuries, they would generally have a greater risk of default should one of the issuers face financial hardship.

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What are the risks of investing in bonds?

As with any investment, bonds have risks.
These riskes include:

  • Credit risk.
    The issuer may fail to timely make interest or principal payments and thus default on its bonds.
    Interest rate risk.
    Interest rate changes can affect a bond’s value.
    If bonds are held to maturity the investor will receive the face value, plus interest.

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