Corporate Bond
Debt issued by a company to raise capital, paying a coupon above Treasuries to compensate investors for credit risk.
A corporate bond is a debt security issued by a company to fund operations, acquisitions, or refinancing. The investor lends to the firm and receives periodic coupons plus principal at maturity. Because a corporation can default — unlike the U.S. Treasury — corporate bonds yield more than same-maturity Treasuries; that extra yield is the credit spread.
Corporate bonds sit above equity in the capital structure, so bondholders are paid before shareholders in bankruptcy, with recovery depending on seniority (secured, senior unsecured, subordinated). They split into investment-grade (BBB-/Baa3 and above) and high-yield (junk) tiers, and may carry call provisions that require yield-to-worst analysis.
The practical takeaway: a corporate bond's price is driven by two forces at once — the Treasury yield (rate risk) and the credit spread (default risk). In a flight to safety, Treasuries can rally while corporate spreads widen, so a corporate bond can fall even as the "risk-free" curve drops.