Glossary · Bonds and rates
Corporate bond
A corporate bond is a loan from investors to a company: it usually pays a fixed interest rate, higher than government bonds, and repays the money on a set date.
Also called: company bond, corporate debt, corporates, corporate note
Rated AAA to A, Oct 2026. 10-year Treasury: 5.13%.
Oct 2026. Average since 1984: 1.17.
In plain words
A pizza chain wants to open 100 new restaurants. It could borrow from a bank, or it could borrow from thousands of investors at once by selling corporate bonds: “Lend us $1,000 each; we will pay 5% a year and repay you in 10 years.”
For investors, a company is a riskier borrower than the US government: it can go bust. So corporate bonds pay more than Treasuries. The extra is the credit spread, and it depends on the company’s credit rating.
In Oct 2026, high-quality US company bonds paid about 5.92% a year for 10 years, while the US government paid 5.13%.
Example
A company borrows $500 million
- Slice Co., rated A, sells 10-year bonds worth $500 million with a 5% coupon.
- It pays $25 million a year in interest, in two halves, to whoever holds the bonds.
- Slice Co. earns $200 million a year before interest: the interest takes one-eighth of that, a comfortable share.
- In year 10 it repays the $500 million, often by selling new bonds.
If profits slump and the rating is cut, the bonds’ price drops and new borrowing costs more; bondholders still get paid as long as the company can pay.
One level deeper
The bond’s contract, the indenture, sets the terms: the coupon, the maturity, what happens in a default, and limits (covenants) on what the company may do, such as taking on more debt. Many corporate bonds are callable: the company may repay early, which it does when rates have fallen, just when holders would rather keep them.
Not all corporate bonds are equal. Secured bonds are backed by specific assets, and senior bonds are paid before junior ones in a bankruptcy. Ratings split the market into investment grade and high yield.
Corporate bonds trade mostly between big institutions, not on an exchange; individuals usually own them through bond funds or ETFs. Their interest is taxed as ordinary income.
High-quality company bonds vs Treasuries since 1984
The 10-year yield of US companies rated AAA to A, against the 10-year US Treasury. Both follow the same tides; the gap between them, the credit spread, widens in crises.
The numbers behind the chart
| Date | Corporate bonds rated AAA to A | 10-year Treasury |
|---|---|---|
| Jan 1984 | 12.6% | 11.7% |
| Dec 1990 | 9.4% | 8.1% |
| Dec 2000 | 7.2% | 5.2% |
| Dec 2010 | 4.7% | 3.3% |
| Dec 2020 | 2.0% | 0.9% |
| Dec 2022 | 5.1% | 3.6% |
| Dec 2023 | 5.1% | 4.0% |
| Dec 2024 | 5.1% | 4.4% |
| Dec 2025 | 4.8% | 4.1% |
| Oct 2026 | 5.9% | 5.1% |
Why it matters
They are one of the main ways companies raise money, alongside bank loans and selling shares.
For investors they pay more than government bonds with less risk than stocks, a middle ground found in most bond funds.
Their yields show what markets think about companies’ health: when spreads widen, investors expect harder times.
A common mistake
Myth: Corporate bonds are as safe as government bonds, just with higher interest.
In fact: The higher interest is pay for real risk. Companies can and do default, and in a crisis corporate bond prices can fall while Treasuries rise.
Questions people ask
How do I buy corporate bonds?
Through a broker, which offers individual bonds (usually in $1,000 units), or through bond funds and ETFs that hold hundreds of them. Funds spread the risk of any one company defaulting.
Are corporate bonds safer than stocks?
Generally yes, for the same company: bondholders are paid before shareholders, and the payments are fixed. But a bond’s upside is limited to its interest, while a stock’s is not.
Why do corporate bonds pay more than Treasuries?
Because a company can go bust, while the US government is seen as almost certain to pay. In Oct 2026, high-quality company bonds paid 0.79 percentage points more than Treasuries; riskier companies pay much more.
Read more on BigCapital
About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- US recessions (NBER business cycle dates): National Bureau of Economic Research (NBER), Business Cycle Dating Committee: US Business Cycle Expansions and Contractions.
- High-quality US corporate bonds, 10-year par yield (HQM): U.S. Department of the Treasury, High Quality Market (HQM) Corporate Bond Yield Curve, series HQMCB10YRP; retrieved from FRED, Federal Reserve Bank of St. Louis.
- US Treasury par yield curve rates: U.S. Department of the Treasury, Daily Treasury Par Yield Curve Rates (Interest Rate Statistics).
- S&P Composite (price, dividends, earnings, CAPE), US consumer prices and the 10-year Treasury rate: Robert J. Shiller, Online Data (shillerdata.com).
- High-quality corporate yields are the Treasury’s HQM yield curve, fitted to bonds rated AAA, AA and A; BBB and junk bonds, which pay more, are not in it. The 10-year Treasury yield is GS10 before 1990 and the monthly average of the Treasury’s daily par yield since.
- This page explains a term. It is not investment advice.