Corporate Bonds

Definition of 'Corporate Bonds'

Any bond issued by a company is a corporate bond, right? Wrong. In market lingo, corporate bonds means investment-grade bonds issued by companies. Bonds issued by companies and rated below investment-grade are called high-yield, or junk, bonds.

Corporate bonds are held and traded mainly by institutional investors, including corporate bond mutual funds. Individuals seldom find it worthwhile to buy corporate bonds directly (as opposed to through mutual funds) because of the large sums required to build a diversified portfolio. Anyone with that kind of money to invest in bonds can probably benefit from the tax advantages afforded by municipals.

Corporate bonds are a variety of spread product and are evaluated as such.