An investor expects inflation to rise. Which bond type would better protect her real returns?
Inflation-indexed (or floating rate) bonds adjust payments as conditions change; fixed-rate bonds lose real value when inflation rises.
The concept: Risks in fixed income
Government bonds are treated as risk-free and yield the least. PSU and bank paper sits in between, and pure corporate paper yields the most. The two broad groups of risk are market risk (interest rates) and credit risk (the borrower).