Why are government securities considered 'credit risk free'?

Government securities are designated as 'credit risk free' primarily because they represent the national government's indebtedness. When a government issues securities, it is effectively borrowing money, and these securities are backed by the full faith and credit of the government itself. This implies that the government has the ability to raise taxes or print money to meet its obligations, making the likelihood of default extremely low compared to private corporations.

This is in contrast to options based on private backing, insurance by financial institutions, or the duration of the instruments. Those scenarios involve various degrees of risk not associated with government securities, which are often viewed as among the safest investments available, especially for investors seeking stability in their portfolios.