Definition
High-yield bonds, also called junk bonds, are rated BB+ or lower by S&P (Ba1 or lower by Moody's). They offer higher interest rates to compensate for increased default risk. These bonds are issued by companies with weaker credit profiles or higher leverage, making them more sensitive to economic conditions.
Example
A company with a BB rating issues bonds at 8% yield, compared to 5% for investment-grade bonds, reflecting the additional risk.
FAQ
What is High-Yield Bond (Junk Bond)?
A bond rated below investment grade that offers higher yields due to higher risk.
Why is High-Yield Bond (Junk Bond) important?
High-Yield Bond (Junk Bond) helps investors evaluate fixed income and make more informed decisions.