Typically issued by corporations or other large organizations, corporate bonds are a popular way for a company to raise capital and conduct business. Corporate bonds can either be securitized by the collateral of real property or assets, or backed by the general creditworthiness of the company.

The specific creditworthiness of a company is dependent on, among other things, its financial resources, its standing relative to the competition, and the environment in which the company operates. Corporate bonds are available in a variety of credit qualities, which influences the yield provided on the bond.

Usually offering higher yields than Treasury securities, corporate bonds may provide greater potential for capital appreciation. Corporate bonds are issued in a variety of maturities and coupon structures, some of which may be callable at the option of the issuer.

To help investors select appropriate corporate bonds, Financial Advisors have access to corporate credit research written expressly for the individual investor by a team of experienced credit analysts. Our Wealth Management Research team offers:

• Credit ratings and credit trends on 70 issuers within our credit issuer universe.
• Coverage that is diversified with regard to exposure by ratings, industry sectors and maturities.
• Assessment of recent corporate developments and credit investment case studies including financial analysis, company description and investment recommendations.

Interest Rate Risk - Corporate bonds are subject to market value fluctuations as interest rates rise and fall. If sold prior to maturity, the price received for an issue may be less than the original purchase price.

Reinvestment risk - Since most corporate issues pay interest semiannually, the reinvestment of coupon payments over the life of the bond can have a major impact on the bond's total return. If interest rates decline, investors may be faced with reinvestment at lower prevailing rates.

Credit/Event Risk - Corporate investments are subject to event risk and changes in credit quality. Companies can experience increased competition, takeovers and other economic situations that may have adverse effects on the market value of their securities.

Call Provisions - When evaluating the purchase of a corporate bond, you should be aware of any features that may allow the issuer to call the security. This is particularly important when considering an issue that is trading at a premium to its call price, since the return may be negatively impacted if the issue is redeemed.

UBS Financial Services Inc. does not provide tax or legal advice.  Please contact your tax advisor regarding the suitability of these investments in your portfolio. 

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