Corporate bonds are debt securities issued by a public or private corporation in order for the company to raise capital for business growth, research and development and purchasing. They have been a part of investors portfolios since the 1860s.
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1860s: The Beginning
In the beginning, the vast majority of corporate bonds were issued by mining, railroad and canal companies.
Between 1866 and 1872, the bond market went through a large expansion. In 1866, there were 158 bond issuers; by 1872, the number had reached 421.
1873-1875: Major Defaults
After great performances in the 1860s, especially from the railroad companies, the corporate bond market had major problems with companies defaulting between 1873 and '75.
Although the corporate bond market had some major catastrophes, such as companies defaulting on bonds and going out of business, it still continued to grow. By 1899, the number of issuers reached 855. Newcomers to the scene included gas and electric utility companies.
Early 20th Century: Defaults
Even though more companies were issuing bonds, many continued to go into default. Most of these companies were involved with the railroads, which had seen a slowdown in expansion.
Since the 1940s, the bond market has continued to grow. New companies have emerged as old companies have gone away, and there are thousands of corporate bonds to choose from today in almost every business sector.
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