Corporate bonds are bonds issued by businesses. In 2001, trade on these bonds in the US exceeded 15 billion dollars a day. Most bond trades are made “over-the-counter,” or in other words, they are traded directly between brokers. Only a small portion of American bonds are listed in a market.
Generally, the interest offered on corporate bonds is higher than that of government bonds, and that’s due to their higher risk. Corporate bonds are known for their diversity. A great variety of companies, from all sectors of the economy issue bonds, and these bonds mature at different times and carry different ratings. This wide diversity offers investors much flexibility in building their portfolio.
Corporate bonds are generally issued with a par value of 1,000 dollars, and sometimes they may have a par value of 5,000 dollars.
Sorting Corporate Bonds According to Their Maturity Date
Bonds are often sorted into three different groups according to their maturity date.
|Group Name||Maturlty Date|
|1||Short Term Bonds||Within 5 Years|
|2||Medium Term Bonds||Between 5 and 12 Years|
|3||Long Term Bonds||Beyond 12 Years|