Different types of bonds


Angel Bonds

Angel bonds are investment-grade bonds, bonds which have credit rating of Baa3 to Aaa (Moodys), BBB- to AAA (S&P) or BBB- to Aaa (Fitch) and normally offer a lower interest rate because of the high credit rating. If the company’s ability to pay back the bond’s principal is reduced, the bond rating may fall below investment-grade minimums and become a ‘fallen angel’.

Callable Bonds

Callable bonds can be redeemed by the issuer prior to maturity. The main reason of a call is a decline in interest rates. If interest rates have declined since a company first issued, they would likely want to refinance this debt at a lower rate. In this case, the company will call its current bonds and reissue new, lower-interest bonds.

Corporate Bonds

Corporate bonds are issued by corporations. Generally, a short-term corporate bond has a maturity of less than five years, intermediate is five to 12 years and long term is more than 12 years.

High-yield Bonds

A high-yield bond, also known as a “junk bond” is a bond rated below Ba1 (Moodys), BB+ (S&P) or BB+ (Fitch) because of its high default risk. As the name suggests, high-yield bonds typically offer interest rates higher than investment grade bonds.

Perpetual Bonds

Bonds that have no maturity date. Normally, they will have a call date.

Exchange Traded bonds

Bonds that are listed and investors are able to buy/sell on the exchange. They are normally traded in a smaller size as compare to the Over-The-Counter (OTC) bonds. However, prices quoted on the exchange are ‘dirty’ prices (including accrued interest) whereas for OTC bonds, prices are normally quoted as ‘clean’ prices. If you have a Phillip Trading Account, you may login to POEMS 2.0 Trading Platform to buy exchange traded bonds.