Corporate bonds are offered at various rates of interests and the interest rate is called corporate bond rate. Corporate bonds are debt instruments issued by different corporations for raising money. Different corporations require money for building new plants, business growth purpose or for other operational purposes.
The bond market is an integral part of the capital market and different bonds are offered to the potential investors. Corporate bonds have attained huge popularity, as value of bond outstanding is highest in case of corporate bonds. Leading financial analysts are consistently monitoring the changes in corporate bond rates.
Corporate bonds offer alluring coupon value; coupon is the interest rate that the bond issuer offers. Presently there are various investors who are eyeing for the new issues of corporate bonds as these bonds are offering high rates. In generic, bond purchaser receives coupons half yearly or once in a fiscal year.
Corporate bonds can be distinguished according to the rates offered:
Zero Coupon Bonds: Few corporate bond rates do not offer interests; these bonds are traded at a discount from the maturity value amount.
Fixed Rate Bonds: The interest rate or the coupons of few corporate bonds remain same.
Commercial Paper: There are corporate bonds with a short term tenure (Usually less than a year)
Floating Rate Bonds: The rate different corporate bond depend upon the money market index, these rates can change. Interest amount is offered in every three month or on a quarterly basis.
Inflation linked Bonds: The par value of the bonds is influenced by inflation.
As the interest rates of the bonds goes uphill, the prices of the bonds falls and on the other hand with the rise in bond prices, the yield or return goes down. While purchasing corporate bonds, it is wise to have a clear idea about the different corporate bond. Government issued bonds are safer but corporate bonds yield better returns. Corporate bond indices highlights the rates of different corporate bonds, and financial analysts provide different projections on the basis of these bonds. Financial health of corporate bonds can largely vary and it is necessary to keep a strong eye on the momentum of the bond indices to be alert about the changing rates.
Last Updated on : 10th July 2013