Debenture Bonds

A corporate bond that is backed by the full faith and credit of the company is known as a debenture. These bonds are rated based on their own credit quality. AAA is the highest rating a debenture can receive.

These debt securities trade above the corresponding treasury of the same maturity. If the bond is rated lower, the spread is wider and more attractive.

This is the biggest area of the corporate debt market. Debentures account for more bond issuance than any other corporate debt security. The yields are generally higher on these than that of treasuries, municipals or government agency bonds.

A portfolio rich in non secured corporates can add current income and a higher yield to an investors holdings.

Certain brokerage firms will specialize in debenture issues and some may not. Normally the investing amount is $1000 minimum, but most securities firms require a higher minimum like $10,000 or $25,000. Many of these firms sell most of their corporate bonds to institutions or other brokerage firms.

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