Additionally why are they considered safer than stocks.
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Bonds are basically an agreement between a money lender and a money borrower. The “rate” of the bond at this level can be synonymous with “risk”
That is if someone is asking for $10000 but you aren’t so certain they will pay you back, you have to make your potential gain worth the risk. So you might ask for $12000 in total payments over the course of say 10 years. Now if somebody else asks you for $10000 and you are absolutely certain they will pay you back you might only ask for $10500. Because that borrower is so trustworthy the risk is relatively low, the payment required as compensation will be low.
Basically the more certain you are that the borrower will be able to pay you back, the lower the rate will be. Since the US government is one of, if not the most stable financial systems in the world, its rates are usually very low.
In terms of why they are safer than stocks: stocks values are derived by their appreciation and distributions. Stock distributions are not guaranteed nor is appreciation guaranteed so this has some risk attached to it. A Fixed Income product like a bond is much more rigid in its structure of repayment of the original investment amount. More predictable=less risk and from before less risk = less returns. So therefore (generally) bonds are safer than stocks.
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