U.S. Corporate bonds
Issued by U.S. corporations, these bonds offer you fixed-income payments in U.S. dollars.
When you invest in a U.S. corporate bond, you're loaning to a U.S. corporation. The corporation then regularly pays interest on the value of the bonds you purchased in U.S. dollars. These issues count against foreign content.
At a stated date in the future (maturity date), the company returns the principal amount you purchased.
U.S. corporate bonds offer the following features:
- Income - You earn a fixed rate of interest in U.S. dollars, usually paid twice a year.
- Liquidity - You can sell U.S. corporate bonds at their market value at any time before the maturity date.
- Currency risk - You'll have exchange risk (risk of the value of the investment changing due to converting currencies) if you need to convert back into Canadian dollars.
- Price changes - While the amount of your interest will almost always remain the same, the value of your bond will change daily.
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Before investing in bonds, you should understand the risks involved, including credit risk and market risk. Bond investments are also subject to interest rate risk such that when interest rates rise, the prices of bonds can decrease, and the investor can lose principal value if the investment is sold prior to maturity.