Fixed Income Bonds

An income bond is a type of debt security in which only the face value of the bond is promised to be paid to the investor, with any coupon payments paid only if the issuing company has enough earnings to pay for the coupon payment.

A traditional corporate bond is one that makes regular interest payments to bondholders and upon maturity, repays the principal investment. Bond investors expect to receive the stated coupon payments periodically and are exposed to a risk of default in the event that the company has solvency problems and is unable to fulfill its debt obligations.

Bond issuers that have a high level of default risk are usually given a low credit rating by a bond rating agency to reflect that its security issues have a high level of risk. Investors that purchase these high risk bonds demand a high level of return as well to compensate them for lending their funds to the issuer.