Municipal Bonds ranks second after government bonds in terms of quality, issued by cities, states, provinces or any local government organization these bonds are often tax-exempt.
Corporate Bonds are
issued by companies and depending on the issuer's credit quality, it does generate
a much higher yield than Government and Municipal bonds to attract investors
to purchase the debt. The risk involved in purchasing corporate bonds is, unlike
the government's way of generating income, corporations are more likely to default
if they cannot sustain their revenues needed to repay their obligations. Since
they just can't simply create money or tax people, corporations depend on their
product's ability to sell.