Which type of bond typically has the lowest default risk?

Treasury bonds typically have the lowest default risk because they are issued by the U.S. federal government, which has a strong credit rating and the unique ability to print currency to meet its debt obligations. This bond type is considered the safest investment in the fixed-income market since the government is highly unlikely to default on its debt.

Unlike corporate or municipal bonds, which are subject to credit risk based on the financial conditions of the issuing companies or municipalities, Treasury bonds are backed by the full faith and credit of the U.S. government. As such, investors view Treasury bonds as a risk-free benchmark for other investments and a secure means of preserving capital, particularly during economic downturns.

Convertible bonds, while they may offer conversion features that can be appealing, are still corporate debt instruments and thus carry a higher risk associated with the issuer's potential for default. In summary, Treasury bonds stand out due to their government backing, making them the most secure investment against default risk.