In the world of fixed income investments, mortgage bonds are considered to be a safer option than corporate bonds. This is because a mortgage bond is backed by real property or real estate holdings, which means that in the event of a defaulted loan, the mortgage bondholders can sell off the underlying real property in order to compensate for the default.

Mortgage bonds are issued by financial institutions such as banks, life insurance companies, and government-sponsored enterprises (GSEs) such as Fannie Mae, Freddie Mac, and Ginnie Mae. These organizations use mortgage bonds as a way to raise capital for their own purposes.

Mortgage bonds are usually secured by first-lien mortgages on income-producing properties. This means that if the borrower defaults, the mortgage bondholder is the first creditor to be repaid from the proceeds of a foreclosure. This reduced chance of default makes mortgage bonds more secure than other bonds, making them attractive investments.

In addition to the lower risk, mortgage bonds also tend to offer a lower rate of return. This is because the mortgage bondholder has a specific asset to back the bond that they can sell to recompense them in the event of a default, while corporate bonds lack such holdings.

Mortgage bonds can also offer investors portfolio diversification and a steady source of income. As mentioned, mortgage bonds are considered to be of lower risk than other types of investments, providing investors with the assurance that their investment is relatively secure. The steady and reliable income of mortgage bonds is attractive for investors looking for steady income and capital preservation.

Overall, mortgage bonds carry a lower rate of return than other types of investments, but are considered to be safer due to the real property backing them. They offer investors portfolio diversification, a safe source of regular income, and capital preservation.