The creditworthiness of corporate bonds are tied to the business prospects and financial capacity of the issuer.
The business prospects of companies are dependent on the economy and the competitive situation of industries. Issuers are grouped by industry, for example real estate, resource and retail bonds. Industries with stable revenues and earnings are called "non-cyclicals", where as those whose revenues and earnings rise and fall with the economy and commodity prices are called "cyclicals".
Issuers are also grouped by their credit ratings. Companies that have financial risk because of high levels of debt and variable revenues and earnings are called "below investment grade" or "junk" bonds because of their speculative nature. Higher quality bonds are considered "investment grade".
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