In deposit terminology, the term Sovereign Bond refers to a debt instrument bearing interest and issued by a country. As with all bonds, a Sovereign Bond generally promises to pay a certain amount on a certain date, as well as period interest payments generally termed coupons.
For example, a Sovereign Bond will often provide investors with considerable security due to their payments being guaranteed by a country. This degree of security is usually greater than that offered by municipal bonds issued by municipalities and corporate bonds issued by companies. In addition, a Sovereign Bond tends to be a more liquid investment than a certificate of deposit, for example, since it is readily transferrable to other parties on the open market. In the United States, any income received from investing in U.S. Treasury bonds that are backed by the U.S. government is exempt from local and state taxes.