In looking at my brokerage account for fixed income products, I was looking at both CDs and Corporate Bonds. I was surprised to see that the best 1-year CDs had a higher interest rate than any AAA or AA bonds. (A was slightly higher than the best 1-year CDs).

Why would somebody buy a corporate bond with a lower interest rate over a CD that is FDIC insured?

My money would be locked up in both, but I could sell both on the secondary market if I needed the money early. I'm guessing it's easier to find buyers for a corporate bond on the secondary market, so I could probably get a better price. Could that be a reason why these bond rates are slightly lower?

  • 2
    Consider that FDIC insurance has a $250,000 limit. For institutional investors and businesses (even small businesses), investments will easily exceed this limit. Therefore, the financial soundness of the bank will be a real factor.
    – user71659
    Commented Mar 19, 2018 at 17:57
  • 1
    Were the bonds priced at par (100)? I would guess that even a AAA bond issued at 2 or 3 percent would currently trade at a decent discount.
    – D Stanley
    Commented Aug 31, 2018 at 1:27

1 Answer 1


The investor might choose the bond if it is more liquid (easier/cheaper/quicker to sell) or if the amount they wish to invest is more than the FDIC limit.

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