Investors looking to diversify their portfolios or generate steady interest income often wonder where to buy corporate bonds. Understanding your options is critical, as access, pricing, minimum denominations, transparency, and fees can all vary significantly depending on the route you choose—brokerage platforms, direct offerings, or major financial intermediaries.
Who This Is For & Suitability
Investors seeking to enhance yield or diversify beyond government bonds and cash equivalents.
Those willing to analyze credit risk, liquidity, and pricing transparency.
Buyers with at least a medium-term investing horizon, sensitivity to interest rates, or those matching future cash needs.
Individuals or entities comfortable with higher minimum investments compared to stocks or ETFs.
U.S. context: retail and institutional investors; international access varies (check with local regulators).
Key Facts (At-a-Glance)
Item
Details
Issuer Type
Investment grade (IG) or high yield (HY) corporate entities.
Ratings
Major agencies (Moody’s, S&P, Fitch); impacts yield to maturity (YTM) and yield to worst (YTW).
Coupon Structure
Fixed, floating, or zero-coupon; frequency often semiannual.
Call/Put/Sinking Fund
Callable, putable, or sinking fund features may affect risk/reward.
Covenants
Issuer obligations and restrictions; enforceable by bondholders.
Minimum Denominations
Typically $1,000 or $5,000, but can vary.
Settlement
Generally T+1 (trade plus one business day) in the U.S.
Transparency
Most transactions reported via FINRA TRACE (Trade Reporting and Compliance Engine).
Typical Spread Quoting
Quoted as spread to Treasury (“spread to benchmark”); risk/credit premium reflected.
Accrued Interest
Buyer usually pays seller interest accrued since last coupon.
Where to Buy Corporate Bonds: Main Channels Explained
Full-Service and Discount Brokerages
Major online brokers in the U.S. (e.g., Fidelity, Charles Schwab, E*TRADE, Vanguard) offer extensive access to investment grade and, in some cases, high yield bonds. Account required.
Some brokers offer bond search tools enabling yield, duration, maturity, and credit filtering; order types and minimums vary.
Many brokerage platforms enable secondary-market purchases and, less often, participation in new issues (primary offerings).
Specialized Bond Platforms and Marketplaces
Dedicated fixed income platforms (e.g., large institutional platforms or certain fintech outlets) may offer enhanced screening or even private bond placements for qualified buyers.
Access may be restricted to high-net-worth or institutional accounts—always verify regulatory status in your region.
Direct from Issuer (Rare for U.S. Public Corporates)
Unlike U.S. Treasuries (where individuals may use TreasuryDirect (official)), almost all U.S. corporate bonds are distributed through underwriters/syndicates; direct retail purchases from the issuer are extremely rare.
Some structured notes or private debt placements may be accessed directly by accredited investors; these involve elevated risk and limited liquidity.
Secondary Market via Dealer Network
Most U.S. corporate bonds are traded in over-the-counter (OTC) dealer markets rather than exchanges.
Dealers quote bid/ask prices, and trading may require negotiation, especially for less-liquid or high-yield bonds.
Exchange-Traded Bond Funds and ETFs
Indirect exposure for smaller investors or those prioritizing diversification, daily liquidity, and low minimums.
These funds are traded on exchanges like stocks; see the relevant bond fund section for more.
How To Place an Order for Corporate Bonds
Determine the bond’s CUSIP (unique identifier) using broker search tools or FINRA TRACE data.
Review bond terms: coupon rate, maturity, callable/putable features, clean vs dirty price, and accrued interest.
Use your online brokerage account to search, filter, and place orders (limit or market, where allowed). Some brokers support RFQ (Request for Quote) to multiple dealers.
For less liquid bonds or larger size, consider working directly with a fixed income desk or advisor for price discovery and execution.
Always review trade confirmations, settlement instructions, and accrued interest details.
From Prospectus to Secondary Trading
Issuers file registration statements and final prospectuses with the SEC; these documents disclose use of proceeds, coupon, maturity, covenants, and risk factors.
Bonds are initially sold through underwriting syndicates; not all issues are available to retail buyers at launch.
Most bonds become available to the general public through secondary markets after issuance.
Trading activity and price transparency are enhanced by FINRA TRACE (official), which reports most U.S. corporate bond trades. Check recent prices and volumes for liquidity insight.
Yield, Spread & Credit Risk
Bond yields are typically quoted as yield to maturity (YTM) or yield to worst (YTW), capturing projected returns if held to maturity (or earliest call, for callable bonds).
Current yield reflects coupon income divided by market price; spread to Treasury benchmarks reveals added risk relative to government bonds.
Credit rating (investment grade vs high yield/junk) is a central driver of yield and risk; downgrades or default events can impact bond value significantly.
Bonds may be subject to “event risk” (e.g., mergers, LBOs), which can change the credit profile overnight.
For callable bonds, yield to call (YTC) and reinvestment risk should be considered alongside yield to maturity.
Costs, Taxes & Accrued Interest
Costs generally include bid-ask spreads, dealer markups/markdowns, and, for some brokers, explicit commissions (“sample/illustrative”: $1–$5 per bond; varies by venue and bond type).
The price you see may not include accrued interest; at settlement, buyers typically pay the seller the interest earned since the last coupon period (dirty price = clean price + accrued interest).
Interest income is taxable as ordinary income in the U.S.; any capital gain/loss from the sale of a bond may receive different tax treatment depending on holding period and other factors.
Original issue discount (OID) bonds and tax-equivalent yield calculations have additional rules. For detailed or up-to-date rules, visit the IRS homepage (official).
Bonds purchased in IRAs or tax-advantaged accounts may be subject to different rules on distribution and taxation. Always consult recent IRS guidance and your brokerage’s tax resource center.
Component
What It Covers
How It’s Experienced
Bid-Ask Spread
Liquidity cost in dealer market
Implicit at execution
Dealer Markup/Markdown
Dealer compensation
Embedded in price (“sample/illustrative”)
Commissions/Platform Fees
Broker fees
Per trade (“sample/illustrative”)
Accrued Interest
Coupon earned since last payment
Paid/received at settlement
Expense Ratio (Funds)
Ongoing management costs
Annual % of assets
Taxes
Interest, OID, capital gains
Varies by account and jurisdiction
Call Features & Reinvestment Risk
Many corporate bonds are callable—issuers can redeem them early, especially if rates fall. This caps potential price appreciation and exposes investors to reinvestment risk.
Yield to worst (YTW) gives a conservative estimate if the bond is called before maturity; always review call schedules and make-whole provisions in the prospectus.
For detailed event and call provisions, use your broker’s bond tools and review SEC filings or official prospectuses.
Risks
Interest-rate risk: Prices fall if rates rise; duration and convexity quantify sensitivity.
Credit/default risk: A lower credit rating or default may cause significant losses.
Liquidity risk: Some issues trade infrequently; you may get a less favorable price for large sell orders or less liquid bonds.
Concentration risk: Holding only a few issues may expose your portfolio to company-specific events.
Structural subordination: Some bonds may rank below others in claim priority during issuer distress.
Callable or prepayment risk: Issuers may redeem bonds prior to maturity, especially during falling rate environments.
Rules and access may change; verify current-year procedures, minimums, and fees with your chosen platform and review the prospectus for each bond.
Consider your risk tolerance, investment objectives, and portfolio needs before purchasing, and seek guidance from licensed professionals or official sources as needed.
