Government vs. corporate vs. property bonds

They all share the word "bond", but the three sit at very different points on the risk scale.

The shared idea

A bond is a loan. You hand over capital for a set period, and in exchange you're paid a rate of interest, with your capital returned at the end of the term — assuming the borrower can pay it back. That last clause is where the three types genuinely part ways.

Government bonds: lending to the state

Here the borrower is a national government. Because governments can raise taxes and, in most developed economies, are seen as very unlikely to default, government bonds are generally treated as the lowest-risk end of the bond spectrum. The trade-off is a lower rate of interest than you'd get further along the risk scale.

Corporate bonds: lending to a company

Swap the government for a company and the picture changes. A well-established, highly rated company might pay only a little more than a government bond. A smaller or less certain business might pay considerably more — because there's a real chance it could struggle to repay. This is usually described as credit risk, and it's priced directly into the interest rate on offer.

Property bonds: lending against a development

Property bonds typically fund a specific development or bridging project, secured against the property itself. Rates are often the highest of the three because the risk is concentrated — repayment depends on one project completing and selling as planned, not on the wider finances of an established company or government. These bonds are also usually illiquid: your money is tied up until the fixed term ends, and they don't typically carry the deposit protection that applies to savings accounts.

What tends to matter in practice

The interest rate on offer is a reasonable proxy for risk across all three types — a materially higher rate is compensating for something. Term length matters too: a five-year commitment behaves very differently to a one-year one if your circumstances change. And with property and smaller corporate bonds specifically, it's worth understanding exactly what happens if the borrower can't repay on schedule, not just what happens if everything goes to plan.