How does 7% or more sound to you?

Have a look at an obscure corner of the corporate bond market that is offering high yields and good credit quality.

These securities-known as Baby Bonds-come from well-known companies such as AT&T, Ford, Southern Co and Prudential Financial, which are offering yields of 7% or more.

In fact, yields on the babies are near their highest levels in more than 15 years, and they offer rates that are comparable to junk bonds, but with higher credit quality.

They're known as Baby Bonds because their face value is $25 each, as opposed to the standard $1,000 face value of corporate and municipal debt. One nice feature of Baby Bonds is that they trade like stocks on the NYSE or Nasdaq. That means transparency and liquidity.

This contrasts with the more opaque over-the-counter markets dominated by institutions, where the vast majority of corporate bonds trade. (Retail investors easily can buy $25,000 to $50,000 of individual babies, a small trade in OTC bond market.)

There are nearly $40 billion of Baby Bonds outstanding. It isn't simple to get a full listing, but some brokerage firms, like UBS, closely follow the market.

The positives with Baby Bonds are high yields comparable to many junk bonds for debt that usually carries investment-grade ratings.Yields are higher than those on many preferred stock issues that also trade on the NYSE. Bank preferred stock from giants like JP Morgan yield about 6.5%. Baby Bonds also offer a nice yield premium of about two percentage points above the 30-year Treasury, now around 5.25%.

Baby Bonds are best suited to retirement accounts like IRAs and 401(K) plans because interest is subject to federal and state income-tax rates. That contrasts with preferred stocks, whose dividends generally are taxed at a 20% federal rate like common stocks.

Yields on Baby Bonds have moved higher with long-term Treasury rates. That has choked off new issuance. (One of the few sizable deals in 2026: NextEra Energy Capital's offering of 6.5% Baby Bonds.)

A major risk is the long maturity dates that often stretch beyond 30 years. This makes Baby Bonds highly rate sensitive.

Prices on many bonds have fallen more than 10% this year as long-term rates have risen. If long rates continue to increase amid fears about federal deficits and inflation-see this past week's headlines-Baby Bond prices could fall further. But if long rates fall, Baby Bond prices could rally sharply.

So, are these bonds safe and secure?

Credit quality generally is good since most Baby Bonds have investment-grade ratings of Baa from Moody' and Triple-B from S&P Global Ratings. Frank Sileo, a UBS senior fixed-income analyst, says that given long maturities and limited liquidity on smaller-sized Baby Bonds-some total only $100 million-investors should evaluate the sector on a "bond-by-bond basis."

One wrinkle: Baby Bonds usually can be redeemed by companies five years after the issuance date. This is normally a negative for investors because it limits upside for bond prices. But given the sharp rise in rates, most Baby Bonds trade well below $25, giving them sizable appreciation potential if rates fall and neutralizing the negative redemption feature.

If you're game, the following are some appealing Baby Bonds:

AT&T has a large, $1.3 billion Baby Bond issue with a 5.3% annual interest rate due in 2066 that trades around $19.70 per bond and has a yield to maturity of 7%. This bond (ticker: TBB) traded close to $24 a year ago, illustrating the downside when rates rise. It has investment grade ratings of Baa2 from Moody's and triple-B from S&P, as well as good liquidity. Average daily bond volume: a more than an ample 100,000.

Ford Motor has three sizable Baby Bond issues outstanding; they're appealing due to yields of more than 7.5%. Ford's 6% issue due in 2059 (ticker: F PR C) trades around $20 for a yield to maturity of about 7.7%. The Ford issue is "split-rated," meaning it has an investment-grade rating of BBB- from S&P and a junk rating of Ba1 from Moody's. But Ford looks solid, because the company's financial outlook has improved.

The AT&T and Ford issues are senior debt; most babies are subordinated. They are junior debt and carry more risk. Issuers in many cases can defer making interest payments without defaulting.

Prudential Financial has three subordinated debt issues including a 5.625% bond due in 2056 (ticker: PRS) that trades below $21 for a yield of almost 7%. WR Berkley, a well-regarded property and casualty insurer, has subordinated debt deals outstanding like the 4.125% due in 2061 (WRB PR B) trading around $15 for a 7.25% yield.

Utilities are among the largest Baby Bond issuers in the subordinated market, including Duke Energy and CMS Energy. These deals tend to yield 6.75% to 7%.

But proceed with some caution. Sileo says that many senior debt Baby Bonds are from junk-grade companies. They offer higher yields but more risk.

Example: Lumen Technologies, a provider of telecom services. The Lumen 6.5% bonds due in 2051 (ticker CTGG) trade around $16.50 and yield about 10%, reflecting junk ratings from Moody's and S&P.

Bottom line? For yield-oriented investors willing to accept rate risk, there's plenty to choose from.