This program allows you to buy new issue corporate bonds directly from the issuer in $1,000 increments. Because they have yet to accrue any interest, you pay par. Most bonds in this program are fixed-rate securities—although some have step-up rates—and are unsecured senior or subordinated issues.
Reasons to consider CorporateNotes ProgramSM
- Offered at par value
- Survivor's option (not available on all issues)
- Callable and non-callable notes available
- No transaction costs1
- Fixed rates and Step-ups available
Take advantage of opportunities to purchase corporate notes and other new issue fixed income taxable securities.
What are the benefits?
|Offered at par value||Once the issuers post a notice of availability, issues are typically available for one week. During this period coupons or prices generally do not change. However, the issuers may change or cancel offerings without notice.|
|Survivor's option||To help mitigate market risk during estate planning, a survivor's option is available with many but not all issues. In the event of the death of the holder, the survivor's option may allow the holder's estate to return bonds to the issuer at par. Issuers that currently do not provide the Survivor's option feature are Morgan Stanley, Goldman Sachs, and Deutsche Bank.|
|Call protection options||Corporate notes are offered in both non-callable (call protected) and callable (not call protected) form. Bonds that are not call protected typically offer the benefit of higher yields in the immediate term but there is the risk that the issuer will call or redeem the bonds if the market interest rates fall. Under those circumstances, investment alternatives will yield less than at the time of the original investment. Conversely, notes that are call protected may offer relatively lower rates in comparison with callable issues. Under the falling rate scenario, call protected issues cannot be redeemed before the stated maturity date and thereby shield the investor from interest rate risk, assuming the bonds are held until maturity.|
|No transaction costs||The issuer pays a sales concession to the offering broker dealer on new issue securities, which means that customers buying CorporateNotes through Fidelity are not charged a mark-up or commission on their purchase.|
|Payment flexibility||Each week’s posting usually contains monthly, quarterly, and semiannual payment frequencies, allowing you to tailor your portfolio around your cash-flow needs.|
What are the risks?
|Interest rate risk||Prices are vulnerable to changes in interest rates; if rates rise, the market price of issued corporate notes will generally decline.|
|Credit and default risk||Investors should consider the possibility or risk that an issuer may default on interest or principal payments.|
|Redemption risk||The issuer retains the right to limit the aggregate amount of notes that may be put back in any given year under the provisions of the survivor’s option. In the case of default, rights to put notes back to the issuer under the survivor’s option cease to exist. Additional limitations and restrictions may apply. Read each prospectus for details.|
|Call risk||Issuers can redeem callable bonds prior to maturity. This typically occurs when interest rates decline and the issuer has incentive to refinance their debt at lower prevailing levels of interest rates. When a bond is called, investors typically find that the reinvestment choices the market presents have lower yields for commensurate levels of risk. Investors should read a bond’s prospectus to understand a bond’s call risk.|
|Step-up Coupon||If your Corporate Note has a step-up coupon schedule, the interest rate of your Corporate Note may be higher or lower than prevailing market rates. Generally, a step-up Corporate Note pays a below-market interest rate for an initial defined period (often one year). After the expiration of that initial period, the coupon rate generally increases, and the Corporate Note will pay this interest rate until the next step, at which time it changes again, and so on through the maturity date. Holders bear the risk that the step-up coupon rate might be below future prevailing market interest rates. Because step-up Corporate Notes typically include call provisions, holders also bear the risks associated with callable bonds. In this regard, it is important to understand that if your Corporate Note is called, you will not benefit from the interest payment(s) of the later step(s). The initial rate on a step-up Corporate Note is not the yield to maturity. You receive the yield to maturity (YTM) only if you hold the Corporate Note until maturity (i.e. it is not sold or called). Please review the step-up schedule and call information found in the coupon and attribute columns of the search results page or in the Statutory Prospectus.|
|Liquidity risk||A limited secondary market may exist for certain securities in the event you wish to liquidate prior to maturity. In these cases, investments could be subject to a gain or loss of principal.|