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Corp Bonds Anyone Know How They Work?

GH1
  |     |   1,053 posts since 2017

So i see in the area of brokered cds. You have corp bonds. Example Charles Schwab 1 year bond yeilding 6.5 %. So how does that work verses a straight brokered cd of theirs.

808513BU8/ US808513BU82

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betaguy
  |     |   180 posts since 2022
https://www.edwardjones.com/us-en/market-news-insights/guidance-perspective/corporate-bonds-cds
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GH1
  |     |   1,053 posts since 2017
thank you for sending the link
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Sardonic
  |     |   34 posts since 2022
From that link from betaguy:

"If you plan to own primarily corporate bonds, be sure to diversify by sector."
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w00d00w
  |     |   360 posts since 2012
FWIW, within the last week Moody's affirmed Charles Schwab's senior debt credit rating as A2 with a change in outlook from positive to stable.

Moody's also published a chart that gives the 1970-2021 experience of one year changes in both municipal and global corporate bond credit ratings. For global corporate bonds rated 'A' by Moody's, 0.05% were in default a year later, while another 0.56% had their credit rating lowered below investment grade.

https://www.fidelity.com/fixed-income-bonds/US-municipal-bond-transition-rates
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choice1
  |     |   370 posts since 2023
Are you equating a corporate bond to FDIC insured CD?
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GH1
  |     |   1,053 posts since 2017
Yes was trying to figure if the risk is worth it, Maybe on AAA corp bonds, But yes you lose the backing of fdic. Would AAA companies default. Anything is possible
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sams1985
  |     |   781 posts since 2022
I wouldn’t risk it- def not on a financial institution in this climate. If I remember correctly the banks that failed were rated pretty highly right up to the collapse. Even if the banks get bailed out bond holders are usually left holding the bag.
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betaguy
  |     |   180 posts since 2022
"Would AAA companies default"
Would you trust the rating agencies? I wouldn't.
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MAKNYC
  |     |   323 posts since 2015
For the record even the U.S. Government itself, which most still consider the most risk free issuer there is, lost it’s AAA years ago from S&P. So it’s all relative. And one needs to define ‘default’. Is a contractually late but ultimately made payment a default? Is a ‘one time’ mass print of currency to repay a debt a default? I say yes, along with S&P, but others might tend to focus on alternative definitions.
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