Corporate bond
Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
A corporate bond is a debt security issued by a company to borrow money from investors. The company pays interest at regular intervals, called the coupon, and returns the principal on the maturity date. It gives firms a way to raise long-term funds without taking a bank loan. In India, the corporate bond market is small compared with GDP. Most issuers are top-rated (AAA) PSUs and financial firms, so lower-rated companies still depend on bank loans.
Example
The Bharat Bond ETF (2019) invests in bonds issued by PSUs. It lets small investors buy into corporate bonds through the stock exchange. In 2025, a NITI Aayog report suggested ways to deepen the corporate bond market.
Don't confuse with
- Government securities (G-secs): these are issued by the Centre or the states and carry practically no default risk. A corporate bond carries credit risk, so it pays an extra yield over a G-sec of the same maturity. That extra yield is called the credit spread.
Related concepts
- Debenture
- Convertible bond
- Foreign Currency Convertible Bond
- Masala bonds
- Foreign bonds
- Perpetual bond
- AT1 bonds
- Green bonds
- Sovereign green bonds
- Blue bonds