Corporate bond – Introduction
Corporate bonds are also called corporate bonds. They are debt securities that companies can issue to raise capital for their business.
As an investor, you grant the issuer / company a loan, so to speak, and in return you receive interest which is paid at certain intervals.
As an investment, this type of bond is considered relatively safe for companies with a strong market position, although it usually carries a greater risk than government bonds.
The risk and also the interest rate to be paid essentially depend on the creditworthiness of the issuer. A fixed interest rate is often agreed, which is paid annually, the so-called coupon.
Companies with a worse rating from a rating agency usually have to pay a higher interest rate and vice versa.
Corporate bond – Characteristics and types
Bonds are traded on the stock exchange, their price depends on supply and demand and can therefore differ from the face value. The reimbursement is at face value.
Bond prices are often quoted as a percentage of face value; for a bond whose price corresponds exactly to the face value, this is 100 percent.
The issue can be made by the company itself or in collaboration with an investment bank as a third party issue. As a rule, bonds are first sold on the primary market to institutional and professional investors.
Large companies in particular often and willingly use bond financing. In this case we are also talking about corporate bonds. There are often high requirements for their transparency to be able to trade on the Prime Standard of the Frankfurt Stock Exchange.
