Corporate Bond
A debt security issued by a company to borrow from investors rather than from banks.
How it is identified
Corporate Bond Yield = Government Security Yield of the same maturity + Credit Spread
Unit
qualitative
In depth
Corporate bonds pay more than government securities because they carry default risk, and the whole analysis is deciding whether the extra yield compensates for it. India's corporate bond market is dominated by private placements to institutions, with relatively little liquid secondary trading, which means retail buyers of individual bonds should assume they will hold to maturity. Issuance is heavily concentrated in the highest rating category, so the market for genuinely risky credit is thin. A corporate bond fund provides diversification an individual buying two or three bonds cannot achieve.
Worked example
A five-year corporate bond at 8.6% against a government security at 7.1% pays 150 basis points more, or ₹15,000 a year on ₹10,00,000. That premium is the price of the possibility of not being repaid.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Corporate Bond” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.