Corporate bonds

If it is in need of funds, a company may raise capital on the markets. To tempt investors, it must therefore offer an interest rate that is sufficiently attractive to offset the perceived risk. Properly managed, the risk/return ratio on corporate bonds can increase the potential return on a diversified portfolio.

What are corporate bonds?

A corporate bond is a debt security issued by a private sector company. It gives the holder the right to receive regular interest, generally at a rate fixed when it was issued and distributed in the form of a coupon, and to be repaid the full amount of the principal at its nominal value at maturity.  


  • Interest rate and term to maturity known from the outset.
  • A higher interest rate than the risk-free rate.
  • Repayment in full of the nominal value at maturity (unless the issuer defaults)
  • The quality of the loan is measurable: the ratings awarded by rating agencies give an idea of the issuer's creditworthiness. By targeting issuers with a high credit rating (also referred to as “investment grade”), you can limit the risk to which you will be exposed. In contrast, by opting for issuers with a lower credit rating which are obliged to offer a higher rate of interest, you increase the potential return, but also the risk profile of your portfolio.


List of bond issues open for subscription (FR)


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Investing in corporate bonds is not without risk, but it is, however, possible to assess this risk thanks, inter alia, to the ratings attributed by rating agencies.


The principal risks that apply to corporate bonds are the following:

  • Insolvency risk: this is closely linked to the quality of the issuer. The ratings attributed by rating agencies give investors an idea of the financial health of the issuing company. The higher the rating, the lower the risk of default. Beware, however: no judgement is infallible. If the issuer defaults, the investor could lose every penny of the money he has invested.  
  • Liquidity risk: this depends on the existence and operation of a secondary market for the corporate bond. Basically, the higher the total amount of the issue, the more likely a higher volume of transactions, which reduces the counterparty risk.
  • Exchange risk for corporate bonds issued in foreign currencies. Exchange risk means that on redemption the investor may receive an amount in euros that is less than the initial euro investment. 
  • Interest-rate risk: the price of a corporate bond fluctuates in line with market trends, full repayment only being assured at maturity.


To generate a higher return, an investor can diversify his corporate bond portfolio by including issuers with low ratings or that have no rating at all. He must then be aware of the fact that the risks to which he is exposed will also be higher, a higher yield generally going hand in hand with high volatility, and that if the issuer becomes insolvent, he could lose every penny he has invested. To manage the risk effectively, a private investor may resort to a bond fund, which provides him with broad diversification even with limited capital.

Primary market

When a new corporate bond is issued, the investor may subscribe to it on the primary market at a set price for a set period of time, the so-called “subscription period”.

Take a look at our primary market (pdf, FR) offering.


Secondary market

Like equities, bonds are traded on stock exchanges. To purchase a bond after the subscription period has expired or to sell it before it matures, the investor must go through the secondary market. The price at which the bond can be purchased or sold is then determined by the price at which the bond is quoted, the interest accrued and the brokerage costs. The price at which a bond is quoted will fluctuate on the basis of various factors, such as its residual maturity, the issuer's financial health, the nominal value and money market rates. As a general rule, when money market rates rise, the prices of outstanding bonds have a tendency to fall, and vice versa.


With each new issue promoted by BNP Paribas Fortis, the Prospectus and sales documentation are made available to investors so that they can assess the risks and make an informed decision on whether or not to subscribe. 


List of bond issues open for subscription (FR)Information leaflet on financial instruments (pdf)Rates and charges for securities transactions (pdf)

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