What is a primary characteristic of U.S. government bonds?

U.S. government bonds are widely recognized as low-risk investments due to the full backing of the U.S. government, which is considered one of the most stable and reliable borrowers. Investors typically perceive these bonds as very secure because the likelihood of default is extremely low. The government can generate revenue through taxation and other means, which provides assurance to bondholders that they will receive their principal and interest payments as scheduled.

Additionally, the low-risk profile of U.S. government bonds makes them an essential component of many investment portfolios for both individual and institutional investors seeking a reliable source of income without significant risk exposure. This characteristic is fundamental in the financial markets, where U.S. government bonds often serve as a benchmark against which other investments are measured in terms of risk and yield.

The other options do not accurately characterize U.S. government bonds. For example, they do not exhibit high default risk, which directly contradicts the bond's reputation for safety. Frequent fluctuations in interest payments also do not apply, as U.S. government bonds typically offer fixed interest payments. Lastly, while they are held by both domestic and foreign investors, they are not primarily limited to domestic holders, as international demand for U.S. government securities is also significant.