Yields On Corporate Bonds - Nominal, Yield To Maturity

Yields on Corporate bonds are typically higher than other types of debt securities. The Yield to maturity is based on the nominal coupon rate and price paid. Since Corporates are not backed by a Government or municipality like Treasuries or Municipal bonds, their overall yield is normally higher.

Nominal Yield

This is the coupon rate on the bond when it first comes to market.

From American Investment Training: "This bond interest rate is what the issuer pays to par value (amount of bonds owned). It is fixed and never changes during the life of the investment. This is different than the yield to maturity or the current yield if the price paid for the security is lower or higher than par." More on Understanding Nominal Yield.

The Yield To Maturity

This is the real rate of return for a corporate bond since these are fully taxable, there is no tax free yield like you would see with muni bonds. The YTM may not be realized if the bond is callable. This is a very important factor with corporate bond yields. If the debt is called early, that could increase or decrease your yield based on the call date and the call price.

Other Factors that can affect yield on corporate securities

Length of Maturity

Rating

Yield Curve and current interest rates

As of this writing, yields on all bonds have been at historic lows for some time, so most investors have turned to high yield bond funds or individual stocks and equities.

But for investors who prefer safety and certainty of maturity and principal returned, corporate bonds offer the best pure debt yields. Your overall Yield to maturity and nominal yield will be higher with lower grade - rate corporate issues. Investment grade down to "Junk Bonds" - which is the real term for "high yield bonds" is where the best corporate bond yields can be had

For a greater detailed look at yields of all types for all bonds, please visit Bond Yield Blog

Corporate Bond Quotes

Corporate bond quotes are found on the exchanges or on the Yellow Sheets publication. The YELLOW SHEETS are a daily list of all Over-the-Counter or OTC, (bonds not listed on the NYSE), corporate bonds and are published by the National Quotation Bureau . The list has some quotes from the previous day, but for the most part, the Yellow Sheets are simply information sheets that tell the trading desk which various broker/dealers are willing to trade the particular OTC bond. With the advent of computer data services that provide most of the information about bond inventories, the National Quotation Bureau has moved to providing the Yellow Sheets in an electronic “real time” version. Corporate bonds that trade on the New York Stock Exchange and other exchanges are not found in the Yellow Sheets because they trade on the floor of the exchanges. Three other publications list OTC securities information and inventory availability for stock: Pink Sheets , White Sheets , and Green Sheets.

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