Definition
Default occurs when a bond issuer cannot meet its payment obligations. This may involve missing interest payments, principal repayment, or violating bond covenants. Defaults can lead to restructuring, bankruptcy, or liquidation. Default rates vary by credit rating, with junk bonds defaulting more frequently.
Example
If a company misses a $10 million bond interest payment and can't cure within the grace period, the bonds are in default.
FAQ
What is Bond Default?
When a bond issuer fails to make required interest or principal payments.
Why is Bond Default important?
Bond Default helps investors evaluate fixed income and make more informed decisions.