Safety

The corporate bond market is broad and liquid, with more than $1.52 trillion issued in 2016* alone.

A fairly liquid secondary market allows investors to sell or trade their securities at market price.

The market price is dependent upon the fluctuation of interest rates, as it is with any fixed-income investment. Depending on when you enter the market, your bonds may sell at par, at a premium or at a discount to their face value.

Yield

Corporate bonds generally offer higher yields than U.S. Treasuries.

Corporate bonds’ true value is in the yield spread over other investments they provide.

Depending on the terms, interest payments can be made monthly, quarterly or semi-annually.

Diversity

Corporate bonds offer short-term (up to five years), medium-term (five to 12 years) and long-term (more than 12 years) issues.

Corporate bonds are available in an assortment of credit qualities, maturities and coupon structures.

Some corporate securities are callable.

Limitations

Corporate bond interest payments are usually taxable by the federal and state governments.

Some corporate bonds are callable bonds.

A potential increase in the risk of default exists with corporate bonds when compared with U.S. Treasuries. Other possible types of risks, such as changes in corporate credit rating, a leveraged buyout or a weakening in the industry sector, may affect the market value.

* Securities Industry and Financial Markets Association (SIFMA), US Research Quarterly, Fourth Quarter 2016 (03.1.2017)