Since the first corporate bond was issued in 1992, more than 1 500 corporate debt instruments have been listed on the JSE’s Interest Rate Market.
These instruments allow companies to raise money for large capital-intensive projects. Investors lend their money in return for regular interest payments. After a predetermined period, the loans are paid back to the investors. The liquidity created by listing a corporate bond enables companies to raise long-term debt securities as investors may exit should they require cash flow.
Liquidity remains relatively low compared with government debt, but issuance keeps growing. Some of the instruments on this market are:
- Fixed Rate Bonds
- Fixed Rate Bonds
- Inflation Linked Instruments
- Commercial Paper
- Credit Linked Notes
- Asset Backed Securities
- Mortgage Backed Securities.
Who is this for?
Issuers use the market to raise debt. Investors, including banks, buy corporate bonds to enhance their investment portfolio returns.
The listed debt market is predominately a wholesale market with large investors taking bond positions to satisfy portfolio needs. However, it also caters for the smaller investor,as anyone can buy these instruments.
- Depending on the instrument, interest is fixed, floating or even zero.
- Each loan has specific characteristics that appeal to different investors.
- There is a secondary market in corporate bonds.
- Corporate bonds do not provide any claim to ownership in the issuer.
- No dividends are paid to bondholders.
- Bondholders’ repayments take priority over payments to shareholders.
- Buying bonds may be considered a less risky way to invest in a company than shares.
- Corporate bonds are often considered to be a riskier investment than government bonds.
- Corporate bonds usually pay higher interest rates than government bonds, even for companies with excellent repayment ability.
How to get Corporate Bonds
To access this product, register as a client with a JSE member.