Which type of bond typically has a lower yield?

Treasury bonds typically have a lower yield compared to other types of bonds due to the incredibly low risk associated with them. These bonds are issued by the federal government, which is backed by its taxing power and has a nearly risk-free credit rating. Investors are willing to accept lower yields in exchange for the security and stability that comes with government backing. As a result, Treasury bonds are often seen as a safe haven, especially during periods of economic uncertainty.

In contrast, corporate bonds are issued by companies and carry higher risk since the company's financial health can fluctuate, leading to a higher yield to compensate for that risk. Similarly, municipal bonds, which are issued by states or local governments, may have tax advantages but also come with more risks compared to Treasury bonds. High-yield bonds, often referred to as 'junk bonds', are even riskier and thus tend to offer much higher yields to attract investors.

This strong emphasis on safety and the backing of the U.S. government makes Treasury bonds a preferred choice for risk-averse investors, which directly affects their yield, keeping it lower than the yield on many other bond types.