Corporate Bonds

Corporate Bonds

Corporate bonds are issued by companies trying to raise capital, most commonly in the following industry sectors:

• Public utilities
• Transportation
• Industrial
• Financial services
• Conglomerates

Corporate bonds tend to be more risky than government bonds because they are backed by the individual corporations, not the U.S. government. It’s important to check out a company’s industry ratings before purchasing its bonds, as its ratings are a measure of the company’s financial stability.

By the same token, because you incur greater risk with a corporate bond, investors are generally rewarded with a higher interest rate on corporate bonds than on most government-issued bonds.

Corporate bonds have the following features:

• Minimum purchase is typically $5,000.
• You may purchase newly issued bonds or bonds resold on the market.
• Corporate bonds are subject to local, state, and federal taxation.

Industry Ratings and What They Mean