How to Find Government Bonds with the Highest Yield

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When you’re looking at government bonds, finding those with the highest yield potential is a common goal. A higher yield allows you to earn more from your investment, making it potentially a better choice for earnings-oriented investors. But what does it mean to choose a high-yield government bond, and how do you find them? If you’re asking those questions, here’s what you need to know.

What Does “High Yield” Mean for a Bond?

When it comes to savings products and investment assets, “high-yield” usually means the investment offers higher returns than others. Usually, they offer better interest rates because there’s more inherent risk involved. The increased returns attract investors to bonds they may otherwise skip over because the higher earnings potential makes the risk seem more worthwhile.

What Are High-Yield Government Bonds?

When you look into high-yield bonds, most of the information you’ll find focuses on high-yield corporate bonds, also known as junk bonds. However, these are issued by companies, usually those with a greater risk of default than many investment-grade bonds.

Still, investors can find government bonds — issued by the U.S. Treasury or a similar foreign government agency — with a range of yields, including some that may fall into the high-yield category. While they typically offer lower returns than high-yield corporate bonds, they often come with less overall risk. As a result, they’re an attractive option for many investors who want to secure stronger returns without entering the junk bond market.

Functionally, high-yield government bonds are a pretty straightforward type of investment product. Over the life of the bond, you receive interest payments at preset intervals and at a specific rate. Once the bond matures, you receive the principal back, as well. However, even with government bonds, there’s a chance of default, though it’s typically far lower than you see with alternatives like corporate bonds.

What Are High-Yield Municipal Bonds?

While many U.S. government bonds are issued by the U.S. Treasury, a municipal bond (also called a “muni”) is issued and managed by a state, county or city government instead. Usually, they give municipalities a way to connect with investors to help fund infrastructure projects or everyday local-government operations.

Like traditional government bonds, you receive returns in the form of interest payments. Once the bond matures, you receive the principal back, too.

How to Find High-Yield Bonds

If you’re focused solely on government bonds, you have a few options to find potential investments. Many federal-level bonds are listed on Treasury Direct, making that a solid starting point. Banks and brokerages are other possible resources, depending on the type of bond.

For munis, you can also check banks and brokerages. Alternatively, you may be able to purchase bonds directly from city, county or state government agencies.

With either of those approaches, you can view current rates before you move forward. Then, you can choose bonds that offer the best returns.

Finally, you can use brokerages to find ETFs that deal in high-yield government bonds. This approach lets you diversify with greater ease, as ETFs often feature a broad selection of investments from different sources. Plus, it uses a share-based system, allowing a single investment to potentially generate income indefinitely.