Corporate bonds are securities issued by public and private companies to finance investments or provide operating cash flow. By investing in corporate bonds, you are lending money to the corporation that issued it. In return, that corporation pays you interest and returns the principal to you by a specific date, called the maturity date.

Corporate bonds are an attractive investment option for investors who are willing to tolerate a reasonable amount of risk for a reasonable rate of return. Corporate bonds usually offer a higher rate of return than municipal bonds offer without the higher risk levels that often come with individual stocks and securities.  Many corporate bonds also offer investors a stable income and the ability to diversify their portfolio.

Corporate bond ratings

Like municipal bonds, corporate bonds are graded by rating agencies according to the corporation’s credit history. Investment grade corporate bonds (also known as high grade corporate bonds) are the best quality corporate bonds. The lower the rating, the higher the risk and therefore the higher the interest rate.

Bond ratings allow investors to make educated choices on which bonds represent the best investment options for their risk profile. However, these ratings should not be the sole criterion for any investment decision. Before purchasing bonds, consult your Allen & Company Financial Advisor to make sure it is the right investment for you.

How can we help you?

Allen & Company, Florida’s oldest investment firm, is dedicated to meeting the ever-changing needs of our clients. Please contact us today and let us know how we can help you.

Bond Disclosure

This article has been prepared for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. The accuracy and completeness of this information is not guaranteed and is subject to change. Since each investor’s situation is unique you need to review your specific investment objectives, risk tolerance and liquidity needs with your financial professional(s) before a suitable investment strategy can be selected. Also, since Allen & Company of Florida, Inc. does not provide tax or legal advice, investors need to consult with their own tax and legal advisors before taking any action that may have tax or legal consequences.

Government Bonds
General – All fixed income and variable rate securities are subject to market risk and if sold prior to maturity, proceeds may be more or less than the initial investment. Some securities offered may not be suitable for all investors. Contact your Financial Advisor for more information.

Rating is Moodys /Standard & Poors.  (n) Floating/Variable rate – (c) Yield to Call – (p) Yield to Par Call – (w) Yield to Worst

Discount bonds may be subject to capital gains taxes. Bonds identified as “OID” (original issue discount) were initially issued at a dollar price less than par and qualify for special treatment under federal tax law. Under federal tax law for tax-exempt bonds, the difference between the issue price and par value is treated as tax-exempt interest rather than capital gain.

Conditional Calls or Puts. There are specific requirements related to these features. Please see the bond indenture or offering document for a complete description of restrictions and limitations for these features.

TEY – The Taxable Equivalent Yields shown are assuming the highest state rate. These rates are believed to be from a reliable source, but Allen & Company of Florida, Inc.  cannot guarantee their accuracy. Federal and state income tax can change without prior notification.

New Issues - Offerings of New Issues may be made only by the official statement for the bonds.
Zero Coupon Bonds - The market value of zero coupon bonds fluctuates more in response to changes in market conditions than regular coupon bonds and, therefore, may not be suitable for all investors. Please note that accrued interest is paid at maturity, but, for taxable bonds, is subject to taxes annually as ordinary income, even though no income will be received by the investor.
Treasury Bonds - As with all fixed income securities, there is no guarantee as to the market value of these securities if they are sold prior to maturity or redemption.
Agency – As with all fixed income securities, there is no guarantee as to the market value of these securities if they are sold prior to maturity or redemption. Agency Terms: Freddie Mac is Federal Home Loan Mortgage Corp. Fannie Mae is Federal National Mortgage Association. Sallie Mae is Student Loan Marketing Association.
Corporate Bonds – Corporate bonds may be investment grade (Aaa/AAA – Baa3/BBB) or high yield (Ba/BB – D).  High-yield bonds are subject to greater risk of loss of principal and interest, including default risk, than higher-rated bonds. Therefore, their prices may be more volatile. If the bonds are insured, the insurance pertains to the timely payment of principal (at maturity) and interest by the issuer of the underlying securities and not to the price of the bond, which will fluctuate prior to maturity. The guarantees are backed by the paying ability of the listed insurance company.
Municipal Bonds – Municipal bonds may be investment grade (Aaa/AAA – Baa/BBB) or high yield (Ba/BB – C).  High-yield bonds are subject to greater risk of loss of principal and interest, including default risk, than higher-rated bonds. Income may be subject to state and/or local income taxes and/or the alternative minimum tax (AMT). Municipal Securities subject to AMT assume a “non taxable” status for yield calculations. Certain municipal bonds income may be subject to federal income tax. Those bonds are identified as “taxable”.  Gains on sales/redemptions of municipal bond may be taxed as capital gains.  If the bonds are insured, the insurance pertains to the timely payment of principal (at maturity) and interest by the issuer of the underlying securities and not to the price of the bond, which will fluctuate prior to maturity. The guarantees are backed by the paying ability of the listed insurance company.
Certificates of Deposit – The standard maximum FDIC deposit insurance is $250,000 per depositor, per insured depository institution for each account ownership category. FDIC insurance does not apply for any loss of principal due to market fluctuations and does not cover any premium paid over the face value of the CD. CDs with step-down and/or call provisions may be less favorable than traditional CDs without these features. The terms of callable CDs are generally longer than the typical CD. Investors should be prepared to hold CDs until maturity or until it is called at the prevailing interest rate, which could be in a lower interest rate environment. As a trade-off for the competitive yields offered by Callable CDs, investors must be able to accept the risk of their CDs being called prior to maturity. This means the investor may have to reinvest principal at a lower interest rate. As with traditional CDs, holders wishing to sell their CD step-ups before maturity will be subject to market risk. Liquidity in the secondary market can be limited.
Medium Term Notes – Medium Term Notes are sold only by the prospectus or offering circular of the individual issuer. An investor should read the prospectus or offering circular carefully before investing or sending money. This is neither an offer to sell nor the solicitation of an offer to buy any financial instruments. There can be no assurance that a trading market will ever develop or be maintained. Medium Term Notes are the unsecured debt of each respective issuer, subject to both market and credit risk.

Allen & Company of Florida, Inc. is a provider of brokerage services and is not affiliated with BondDesk Trading LLC. Access to the BondDesk Alternative Trading System is provided through First Clearing, LLC (“FCC”). While we believe the information provided through BondDesk to be accurate, we assume no responsibility for inaccurate information. Fixed and variable income securities are subject to market risk and if sold prior to maturity, proceeds may be more or less than the initial investment. Some securities offered through the BondDesk system may not be suitable for all investors.   Allen & Company of Florida, Inc.  is a member of the FINRA/SIPC. Accounts carried by First Clearing, LLC member NYSE/SIPC.