Corporate bonds

Corporate bonds are very similar to government bonds however you would be lending to a public or private company rather than the government.

The risk of investing in corporate bonds is usually considered greater than investing in government bonds as the company guaranteeing the capital and interest, may, for example, go out of business.

Government bonds have the security of being backed by the Reserve Bank of Australia. If you are investing in corporate bonds, it is important to research the company to ensure they have the capacity to repay your capital and the interest due to you.

So, all things being equal, you would expect to receive a slightly higher coupon or interest rate for a corporate bond as the investment risk is higher.