Corporate Bonds
Corporate Bonds are similar to Gilts, and work in much the same way, however Corporate Bonds, as the name suggests, are issued by companies as opposed to Governments. They do this as a cheaper form of borrowing money than perhaps arranging a bank loan. By virtue of the increased risk of a corporate defaulting, (even a multinational one) in order to attract investment they often pay a higher level of interest than a Gilt.
Corporate Bonds are usually invested in by fund managers and other 'professionals' and as per Gilts, they usually do this to achieve diversification and produce an income. |
