Features and Benefits:

• Credit Quality - - Corporate bonds are evaluated and assigned a rating based on credit history and ability to repay obligations. The higher the rating, the safer the investment. (See Understanding Credit Risk)
• Yields - Corporate bonds usually offer higher yields than comparable-maturity government bonds or CDs. This high-yield potential is generally accompanied by higher risks
• Tax Consequences - Corporate bonds are fully taxable debt obligations. Investors should always consult a tax professional regarding their individual tax situation
• Liquidity/Marketability - If you must sell a bond before maturity, in most instances you can do so easily and quickly because of the size and liquidity of the market
• Diversity - Corporate bonds provide the opportunity to choose from a variety of sectors, structures and credit-quality characteristics to meet your investment objectives

Risks:

• Interest-Rate Risk - Some investors are confused by the inverse relationship between bonds and interest rates—that is, the fact that bonds are worth less when interest rates rise. But the explanation is essentially straightforward:
• When interest rates rise, new issues come to market with higher yields than older securities, making those older ones worth less. Hence, their prices go down
• When interest rates decline, new bond issues come to market with lower yields than older securities, making those older, higher-yielding ones worth more. Hence, their prices go up. As a result, if you have to sell your bond before maturity, it may be worth more or less than you paid for it.
• Credit Risk - A bond issuer’s ability to pay its debts—that is, make all interest and principal payments in full and on schedule—is a critical concern for investors. Most corporate bonds are evaluated for credit quality by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings. Bonds rated BBB or higher by Standard & Poor’s and Fitch Ratings, and Baa or higher by Moody’s, are widely considered “investment grade.” Bonds with a rating of BB (Standard & Poor’s, Fitch Ratings) or Ba (Moody’s) or below are speculative investments. They are called high-yield, or junk, bonds. Such bonds are issued by newer or start-up companies, companies that have had financial problems, companies in a particularly competitive or volatile market and those featuring aggressive financial and business policies. They pay higher interest rates than investment-grade bonds to compensate for the extra risk. (However, if they were issued before the company’s financial difficulties, the risk may not be offset by a higher yield.)
• Event Risk: In recent years, the managements of many corporations have tried to boost shareholder value by undertaking leveraged buyouts, restructurings, mergers and recapitalizations. Such events can push bond values down, sometimes very suddenly, because they may greatly increase a company’s debt load. Although some corporations have now established bondholder protections, these are neither widespread nor foolproof. All bonds are subject to this potential risk. An individual investor should see if the rating agencies have written commentaries on a company’s vulnerability to event risk before buying its bonds
• Corporate bonds are also subject to Market, Call, Make-whole calls, and Sector Risk

Taxes: For full information regarding the tax consequences of Corporate bonds, investors should consult their tax advisor.

For more information please access our affiliate site BondClass.com. or call one of our Relationship Managers at 1-888-266-3708.