Many entities issue bonds. The bond market separates bond issuers into
categories based on the similarities of these issuers and their characteristics.
These major categories are: supranational agencies (i.e. World Bank), national
governments (i.e. Government of Canada), provincial or state governments (i.e.
Province of Ontario), municipal governments (i.e. City of Edmonton) and
corporate bonds (i.e. General Motors).
Bonds issued by governments are backed by the "full faith and credit"
of the particular government; bonds issued by supranational agencies are backed
by the "full faith and credit" of the governments supporting the
agency. Governments have the power to raise taxes to make bond interest and
principal payments. The revenues or tax base of a government compared to its
expenditures form the key indicator of the creditworthiness of a government
issuer. A corporate issuer's creditworthiness flows from its business prospects
and financial capacity. |