Corporate debt refers to all bonds and bond-like instruments that corporations issue to investors in the wider credit market. Bond-like, short-term commercial paper is traded on the money market while longer term corporate bonds are traded on the bond market.
Long and short
Most corporate debt issued to the credit market are as bonds with maturity (repayment date) of one year or longer and a standard coupon (interest rate) payment structure, sold in blocks of $1,000 par (face) value. In the U.S., corporate bond yields are higher than same-term government bonds because of their greater risk, and coupon and redemption payments are usually fixed. However, some corporate bonds carry floating rates to protect them from volatile markets, while zero-coupon bonds are sold at a deep discount to their face value. Corporate bonds are ranked on a descending scale from Aaa or AAA (lowest risk) to C (highest risk) by ratings agency Moody's, with a better rating meaning lower borrowing costs. Competing agencies Fitch's and Standard & Poor's also rate corporate bonds on similar scales.
The recent credit crisis on Wall Street and global financial markets has restricted the ability of many corporations to raise capital through corporate debt, both long-term and short-term. Corporate debt with maturity under one year is called commercial paper and trade in much larger-denomination blocks than corporate bonds and trades on the money market among mostly banks and institutional investors. The commercial paper market has also been slugged by the crisis and higher costs have forced some companies out of it altogether. Some corporate bonds can be traded on major exchanges and electronic trading networks as "listed bonds", although most corporate debt and all commercial paper is actually traded over the counter (OTC) through decentralized, unregulated markets. Corporate debt of one year's maturity or more, by contrast, falls under the SEC's aegis.