Government Bonds Government BondsA supranational agency, such as the World Bank, levies assessments or fees against its member governments. Ultimately, it is this support and the taxation power of the underlying national governments that allow these organizations to make payments on their debts.
The "central" or national governments also have the power to print money to pay their debts, as they control the money supply and currency of their countries. This is why most investors consider the national governments of most modern industrial countries to be almost "risk-free" from a default point of view.
Provincial or state governments also issue debt, depending on their constitutional ability to do this. Canadian provinces, notably Ontario, borrow more than many smaller countries. Most investors consider provincial or state issuers to be very strong credits because they have the power to levy income and sales taxes to support their debt payments. Since they can not control monetary policy like national governments, they are considered lesser credits than national governments.
Cities, towns, counties and regional municipalities issue bonds supported by their property taxes. School boards also issue bonds, supported by their ability to levy a portion of property taxes for education.
Many government related institutions issue bonds, some supported by the revenues of the specific institution and some guaranteed by a government sponsor. In Canada, Federal government agencies and Crown corporations issue bonds. For example, The Federal Business Development Bank (FBDB) and the Canadian Mortgage and Housing Corporation (CMHC) bonds are directly guaranteed by the Federal government. Provincial crown corporations such as Ontario Hydro and Hydro Quebec are guaranteed by the Provinces of Ontario and Quebec respectively.
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