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Updated 2mo ago.
Updated 2mo ago.
A corporate bond is a debt security issued by a company to fund its operations or projects. In exchange for your loan, the company pays you regular interest (the coupon) and returns the principal at maturity. The yield is generally higher than a government bond, but so is the risk.
A major Canadian bank like Royal Bank can issue a 5-year corporate bond with a 4.5% coupon. The ZCB.TO ETF (BMO Corporate Bond) holds a diversified basket of investment-grade Canadian corporate bonds.
If you want higher yield with more risk, there are high-yield corporate bonds, accessible through ETFs like XHY.TO (iShares US High Yield Bond CAD-Hedged).
Corporate bonds provide higher income than government bonds while remaining less risky than stocks. For beginners, an ETF like ZCB.TO offers instant diversification across dozens of companies, reducing the risk that a single bankruptcy impacts your portfolio.