A corporate bond is a bond issued by a corporation. It is a bond that a corporation issues to raise money in order to
expand its business.  The term is usually applied to longer-term debt instruments, generally with a maturity date
falling at least a year after their issue date. (The term "commercial paper" is sometimes used for instruments with a
Sometimes, the term "corporate bonds" is used to include all bonds except those issued by governments in their own
currencies. Strictly speaking, however, it only applies to those issued by corporations. The bonds of local authorities
and supranational organizations do not fit in either category.
Corporate bonds are often listed on major exchanges (bonds there are called "listed" bonds) and ECNs like
MarketAxess, and the coupon (i.e. interest payment) is usually taxable. Sometimes this coupon can be zero with a
high redemption value. However, despite being listed on exchanges, the vast majority of trading volume in corporate
bonds in most developed markets takes place in decentralized, dealer-based, over-the-counter markets.
Some corporate bonds have an embedded call option that allows the issuer to redeem the debt before its maturity
date. Other bonds, known as convertible bonds, allow investors to convert the bond into equity.
One can obtain an unfunded synthetic exposure to corporate bonds via credit default swaps.
Corporate debt falls into several broad categories:
secured debt vs unsecured debt
• senior debt vs subordinated debt
Generally, the higher one's position in the company's capital structure, the stronger one's claims to the company's
assets in the event of a default.
Compared to government bonds, corporate bonds generally have a higher risk of default. This risk depends, of
course, upon the particular corporation issuing the bond, the current market conditions and governments to which the
bond issuer is being compared and the rating of the company. Corporate bond holders are compen