Final answer:
Corporate bonds are the least safe from federal tax, as they do not benefit from tax exemptions like municipal, Treasury, or agency bonds, and their interest income is taxable at both the federal and often state and local levels.
Step-by-step explanation:
The type of bond that is the least safe from federal tax is the corporate bond. While municipal bonds often offer tax-free interest at the federal level and sometimes state and local levels, and U.S. Treasury bonds (issued by the federal government) and agency bonds (issued by government-sponsored enterprises) may have some tax advantages, corporate bonds typically have no such tax exemptions. Interest income from corporate bonds is subject to federal taxes, and in many cases, state and local taxes as well. Corporate bonds are issued by firms and tend to pay a higher interest rate than Treasury bonds to compensate for their higher risk of default.
According to the provided information, firms are riskier borrowers compared to the U.S. government, which is why corporate bonds usually offer a higher yield. However, this higher yield comes with an increased risk of tax liabilities for the investor. Treasury bonds typically pay more than bank accounts but less than corporate bonds due to the lower risk associated with lending to the U.S. government.