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Corporate Bonds and Credit Analysis

The risks associated with holding a fixed interest debt instrument are closely connected with the ability of the issuer to maintain the regular coupon payments as well as redeem the debt on maturity. Essentially the credit risk is the main risk of holding a bond. Only the highest quality government debt, and a small number of supra-national issues, may be considered to be entirely free of credit risk. Therefore at any time the yield on a bond reflects investors' views on the ability of the issuer to meet its liabilities as set out in the bond's terms and conditions. A delay in paying a cash liability as it becomes due is known as technical default and is a cause for extreme concern for investors; failure to ...

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