Individual Bonds

A bond is an interest-bearing security that obligates the issuer to pay the bondholder a specified sum of money, usually at specific intervals (known as a coupon), and to repay the principal amount of the loan at maturity. Zero-coupon bonds pay both the imputed interest and the principal at maturity.

Reasons to consider individual bonds

  • Diversification
  • Regular income1
  • Potential tax benefits
  • Preservation of principal1

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Types of bonds

U.S. Treasury

Direct debt obligations issued by the U.S. government, which uses the revenue from the bonds to raise capital and/or make payments on outstanding debt
Agency

Debt obligations issued by agencies of the U.S. federal government or by private agencies, called government-sponsored enterprises (GSEs), which are federally chartered, but publicly owned by their stockholders
Municipal

Debt obligations issued by states, cities, counties, and other public entities that use the loans to fund public projects, such as the construction of schools, hospitals, highways, sewers, and universities
Corporate

Fully taxable debt obligations issued by corporations that fund capital improvements, expansions, debt refinancing, or acquisitions that require more capital than would ordinarily be available from a single lender
High yield

Debt securities rated below investment grade2 based on the issuer's weaker ability to pay interest and capital, resulting in the issuer paying a higher rate to entice investors to take on the added risk

New issue and secondary markets

Fidelity offers investors the opportunity to participate in both the new issue and secondary bond markets. Investors pay no commissions or concessions when participating in new issue offerings, but Fidelity charges a mark-up (for buys) or mark-down (for sells) in the secondary market. (See Fidelity Brokerage Commission & Fee Schedule (PDF) for more information.)

New issues have a significant presence in the bond market as issuers are constantly entering the market to “roll” their existing debt as well as create new debt. Accessibility of new issues varies for individual investors, with the Treasury market most accessible and the corporate market least accessible.

The secondary market is composed of bonds that were issued in the past and may be traded until redeemed by the issuer. Unlike equity markets where the universe of approximately 5,000 securities is available to trade at all times within market hours, the U.S. bond markets actively offer only a relatively small subset (tens of thousands) out of the more than 1.2 million unique bonds currently in existence. The composition of this offered subset also varies from day to day.

Fidelity makes it easy for you to view and select from our large inventory of new issue and secondary market bonds and CDs to meet your needs.

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