Corporate bonds are debt obligations issued by private or public corporations with maturities ranging from 9 months to 30 years. These bonds (or notes) generally are issued in denominations of $1,000. New issue and secondary market corporate notes are offered to investors by nearly all broker dealers.
Approximately 25 corporate issuers have new issue note programs designed for individual retail investors. This overview reviews the general features and risk characteristics of these kinds of new issue corporate notes. An investor should read the individual prospectus carefully for risks specific to each issuer and each series of notes

Features of New Issue Corporate Bonds

• New Issue Corporate Bond Platforms - New issue corporate bonds are issued by investment grade corporations and are offered by nearly all major broker dealers. The three leading new issue corporate bond platforms for the retail investor are InterNotes®, Direct Access Notes®, and CoreNotes®. There are approximately 25 consistent corporate issuers of bonds designed specifically for individual investors.
• Competitive with secondary market yield - New rates from issuers on these platforms are typically posted weekly and reflect current market conditions, making these new issues competitive with prices of secondary market bonds.
• Selection - Each week's offerings of new issue retail corporate bonds include varying maturities, coupon rates and interest payment schedules. This provides flexibility for different investment objectives and the ability to ladder portfolios with new issues and a predictable income stream.
• Offering Periods - New offerings are typically set each week, and in most cases these offerings are available until the following week. The price (par) and coupon remain constant throughout the week, allowing individual investors time to make an informed decision. Offering periods may vary by program.
• Creditor, Not Owner - When purchasing a new issue retail corporate bond, the investor is lending money to the issuer. The investor is entitled to interest payments semi-annually, quarterly or monthly until the bond matures (or is called) and the principal investment is repaid. An investment in a new issue corporate bond means the investor is a creditor, not an owner of the corporation.

Additional Features of New Issue Retail Corporate Bonds

• Pricing - New issue retail corporate bonds typically are offered at par (usually $1,000 per bond). This means no discount or premium pricing, and no accrued interest. When held to maturity, purchases of new issue retail corporate bonds will not incur capital gains or losses. 
• Household Names - Investors are likely to recognize the names of companies sponsoring the new issue retail corporate bond programs, and be familiar with their products and services.
• Variety - New issue retail corporate bonds are typically offered in a variety of maturities and interest payment options, including monthly pay. This allows individuals to accurately match income and portfolio needs.
• Estate Planning - With most of these retail note programs, in the event of death, the holder's estate may, if applicable, at the option of the estate, return (or put) the notes back to the issuer at par. Some limitations and restrictions apply. Investors are urged to read the appropriate prospectus for full disclosure of this feature.
• Ideal for Ladder Structure - The nature of these new issue corporate bond program may be suitable for investors seeking to create a laddered portfolio of investments.

Risks and Other Investment Considerations

• Interest Rate Risk:   New issue retail corporate bonds may be either secured or unsecured debt obligations of each respective issuer. In addition to issuer-specific risks, an investment in new issue corporate bonds carries interest rate risk if the bond is sold prior to maturity.
• Like all bonds, original issue bonds tend to rise in value when interest rates fall and decline in value when interest rates rise. Investors who sell their bonds prior to maturity will be exposed to interest rate risk.
• Typically, the longer maturities have a greater degree of price volatility. If the bonds are callable, the price volatility will be influenced by the maturity, the call date, and the prevailing level of interest rates.
• If the bonds are held until maturity, investors are likely to be affected by price fluctuations, because investors will receive the par, or face value of the bonds at maturity (assuming a creditworthy issuer). 
• Credit Risk: The ability of a corporate issuer to make all interest and principal payments in full and on schedule is a critical concern for investors. Most corporate issuers are evaluated for credit quality by the major rating services, such as Standard & Poor's (S&P), Moody's Investors Service (Moody's), and Fitch.
• Investors can check the rating of a corporate issuer prior to making an investment by contacting a financial advisor or through various websites. This information also is typically found in the prospectus for particular bonds.
• Bonds rated BBB or higher by S&P, Baa or higher by Moody's, and BBB or higher by Fitch are widely considered "investment grade". Any credit ratings that are assigned to corporate bonds may not reflect the potential impact of all risks on the market value of these securities. 
• Call Risk One of the most difficult risks for investors to understand is "call" risk. If a specific issue of retail corporate bonds is callable, the issuer retains the right to retire or redeem the bond before the scheduled maturity date. For the issuer, the chief benefit of such a feature is that it permits the issuer to replace the outstanding bond with one with a lower interest rate (or cost to the issuer).

A call feature creates uncertainty as to whether an investment in callable corporate bonds will remain outstanding until its maturity date. Investors risk losing an investment paying a higher rate of interest when rates have declined and an issuer decides to call in their bonds. When callable bonds are called, investors may be faced with reinvesting in securities with lower yields. When a bond is callable, it tends to limit the appreciation in a bond's price that could be expected when interest rates decline. Given these potential disadvantages, callable corporate bonds usually carry higher yields than non-callable bonds.