Investors buy corporates for a variety of reasons:
Corporates usually offer higher yields than comparable-maturity government bonds or CDs. This high-yield potential is generally accompanied by higher risks.
People who want steady income from their investments, while preserving their principal, include corporates in their portfolios.
Corporate bonds are evaluated and assigned a rating based on credit history and ability to repay obligations. The higher the rating, the safer the investment.
Corporate bonds provide the opportunity to choose from a variety of sectors, structures and credit-quality characteristics to meet your investment objectives.
If you must sell a bond before maturity, in most instances you can do so easily and quickly because of the size and liquidity of the market.
Types of Issuers
There are five main classifications of issuers representing various sectors that issue corporate bonds:
(1) public utilities;
(2) transportation companies;
(3) industrial corporations;
(4) financial service companies;
Such issuers may be U.S. companies or foreign companies. Foreign governments are also frequent issuers in the U.S. market.