What is a corporate bond?

A corporate bond is debt issued by a company in order for it to raise capital. An investor who buys a corporate bond is effectively lending money to the company in return for a series of interest payments, but these bonds may also actively trade on the secondary market.

Why do investors buy corporate bonds?

Investors who buy corporate bonds are lending money to the company issuing the bond. In return, the company makes a legal commitment to pay interest on the principal and, in most cases, to return the principal when the bond comes due, or matures. To understand bonds, it is helpful to compare them with stocks.

Do corporate bonds yield more than government bonds?

May yield more than government bonds. Corporate bonds tend to pay out more than equivalently rated government bonds. For example, corporate rates are generally higher than rates for the U.S. government, which is considered as safe as they come, though corporate rates are not higher than all government bond rates. Access to a secondary market.

Are corporate bonds fixed income?

(SEC) Generally, corporate bonds are categorized within fixed income, in that the interest expense – i.e. called “coupon payments” – is calculated and paid based upon on the issuance amount.