Although a novice may think that there is little difference between private and government bonds, the bond investing pro will know the difference. In the bond market, it is not much about what amount you are lending, but rather to whom are you lending. The quality of the bond depends upon the amount of money in the issuers pocket to pay it back. Hence, while a private corporation has limits on what it can borrow, governments technically have unlimited credit although recent events in Europe are fast changing this view. Here are some of the major differences between sovereign and corporate bonds:
Tax Revenues: The government has the power to raise taxes on its population to pay the bondholders although that might make the government unpopular and lead to its downfall. Technically, as long as someone in the country has money, the government can tax it to pay the bondholder. A corporation cannot do this, if it doesn