Running Head: CORPORATE BONDS 1

Corporate Bonds

Student’s Name

Institutional Affiliation
CORPORATE BONDS 2

Corporate Bonds; why top-tier bonds are not safe as they might seem

Chapter 7 Financial Topic titled "Bond Valuation," in the class is discussed in the

Financial Times article, namely, “Corporate Bonds, Why top-tier bonds are not as safe as they

might seem.” Monica Erickson elaborates some of the disadvantages associated with bonding,

which fund managers should pay attention to specifically. Among them include the duration of

risk conjoined to investment-grade bonds. Even as Chapter 7 discusses why local governments

turn to bond markets to raise money, it is essential to consider the bond features as well as

classifications.

High quality US corporate bonds, for example, have interest-rate risks despite the

primary components associated like security yields. On the other hand, the return of equivalent

treasuries have gone down to near record lows and that interest rates pick-up only depends on

longevity and speed. As discussed in class that it is essential to understand bond variation key

concepts. Debt and equity, bond features and bond types, bond values, and why fluctuate as well

as bond ratings and impact of inflation on the interest rates are connected to corporate bonds

article.

Primarily, fund-managers who are affected by corporate bonds should take a keen interest

in investment-grade bonds. Even in the current United States Economy, high-quality corporate

bonds have comprehensive risk, especially when twisted to the class of assets. Picking up the

interest rate, which is fixed to speed and longevity, pushes market prices down. And with credit

quality deterioration security yields and treasury yields, concerns are raised on the asset class,

which has gone down to 3%. The Benchmark ICE Bank of America Merrill Lynch US Corporate

index went back to 14% as of 2009. Half of its return comes from decreased treasury rates.
CORPORATE BONDS 3

Indeed, the article is essential in understanding topics covered in class, such as government

bonds, bond ratings, as well as bond repayment features.

References

Dr. Matanova Natalia (2016). Corporation Finance. Exam II Review; Pennsylvania States

University

Erickson, Monica (2020). Corporate Bonds; why top-tier bonds are not as safe as they might

seem. https://www.google.com/amp/s/amp.ft.com/content/3bc5f68e-3076-11ea-a329-

0bcf87a328f2