Typical Returns From Bonds

by Ernesto R. Martin

To give you a sense of returns, bonds from solid, growing companies like AT&T (which are considered "high-quality" or "investment-grade") were paying around 5% in mid-2019, roughly twice what you can get in a 5-year Certificate of Deposit from a bank (which is backed by an agency of the U.S. government). Bonds from companies with lower credit ratings pay more; for instance, those from US Steel, with less than 7 years to maturity, were paying over 8% (US Steel was founded in 1901, and in 2018 had revenues of over $14 Billion and profits of over $1 Billion). Some institutions, like pension funds, only purchase investment-grade bonds, but individual investors can purchase lower-quality bonds (like US Steel) as long as they recognize that there is greater risk.