These are bonds that can be swapped for the same company’s common stock at a fixed ratio, providing a specified amount of bonds for a specified number of shares of stock. The terms are outlined when the bond is issued. Some investors like the ability to convert since, IF the price of the stock rises enough you can profit by swapping your bonds for stock. However, Convertible Bonds are normally offered at a slightly lower rate than a regular bond, since you have the option to "convert" the bond to stock. If the stock price fails to rise or goes down, you will lose money on convertibles. Because convertible bonds can be converted to stocks, they tend to be more closely in sync with the stock market versus the bond market. These are very complicated securities.