Savings bonds are issued by the federal government and can be purchased by the public. Savings bonds are considered one of the safest forms of investment since they are backed by the federal government, which has virtually zero chance of defaulting. Because savings bonds are considered very safe, they also pay a low interest-rate. However, people still buy them for savings.
Savings bonds are issued as debt to the government. The interest rate of savings bonds is determined by the market. Like any debt, the government pays interest on savings bonds to the holders of those bonds (i.e., debt). Just like a person with great credit has a high credit score, the savings bonds have one of the highest credit ratings.
