Risk-Free Bond

A risk-free bond is a debt security that is considered to carry no risk of default, meaning the issuer is virtually certain to repay both the principal and interest. In practice, government bonds issued by stable countries, such as U.S. Treasury bonds, are considered risk-free because governments have the ability to raise funds through taxation or other means to repay their debts. Risk-free bonds are used as benchmarks in finance to measure the performance of riskier investments.

Example

U.S. Treasury bonds are considered risk-free because they are backed by the U.S. government, making them highly secure and reliable for investors.