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One of the ways that businesses raise money is by issuing corporate bonds to various investors.
Corporate bonds are of many types but most of them can be called by the company so that they can repay the principal amount to the investor before the maturity of the bond. There are other companies that have something known as convertible bonds. These bonds can be converted to shares of the company under certain circumstances by the investor. Most investors are more attracted to convertible bonds than bonds which do not have conversion provision. However, this depends on the price of the stock of the company.
If you opt for corporate bonds, you will see that majority of the companies offer your fixed rate bonds. The interest rate for these bonds is fixed until the bond matures and there is no change or fluctuation in the interest rate during the entire term period of the bond.
This does not mean that you cannot get bonds with floating rates. You can and the interest you get from these bonds keeps changing as it depends on various indices like money markets and short term Treasury bills. These corporate bonds offer protection if the interest rate increases. However, your corporate bond returns will be lower than those compared to fixed rate corporate bonds.
It has also been seen that there is a connection between corporate bond returns and weekday seasonality. Based on the markets, the floating rate corporate bond returns keep changing. Markets are usually high at the beginning of week and tend to peter off towards the weekend.
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