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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
A loan to a company. Higher risk than government bonds but better returns.
Why It Matters
Corporate bonds pay more than Treasuries because companies can default. Apple bonds might yield 1% more than Treasuries; riskier companies might pay 5%+ more. During the 2008 crisis, even solid corporate bonds tanked as investors feared defaults. Credit ratings (AAA down to C) tell you how risky a company's bonds are.
Key Points
- Investment-grade bonds (BBB and above) are from stable companies - think Apple, Microsoft, Johnson & Johnson
- High-yield bonds (BB and below, aka 'junk bonds') offer more return but real default risk
- ETFs like LQD (investment-grade) and HYG (high-yield) give you diversified corporate bond exposure
Related Terms
Common Questions
A loan to a company. Higher risk than government bonds but better returns. Corporate bonds pay more than Treasuries because companies can default. Apple bonds might yield 1% more than Treasuries; riskier companies might pay 5%+ more.
Corporate bonds pay more than Treasuries because companies can default. Apple bonds might yield 1% more than Treasuries; riskier companies might pay 5%+ more. During the 2008 crisis, even solid corporate bonds tanked as investors feared defaults. Credit ratings (AAA down to C) tell you how risky a company's bonds are.
Investment-grade bonds (BBB and above) are from stable companies - think Apple, Microsoft, Johnson & Johnson
High-yield bonds (BB and below, aka 'junk bonds') offer more return but real default risk
ETFs like LQD (investment-grade) and HYG (high-yield) give you diversified corporate bond exposure