Also referred to as a "junk bond," it is a bond issued by a corporation or government whose ability to pay interest and repay the principal is in question to varying degrees. Normally, smaller, newer companies and third world countries must offer higher yields to attract investors.
High-yielding debt security rated BB or below by Standard & Poor's Corporation, or Ba or below by Moody's Investor Services. Very speculative and volatile, these bonds are considered a greater risk for investors than are investment-grade issues, and therefore pay higher interest rates to attract investors. Also known as Junk Bonds because of their low credit rating.
Bonds which offer high rates of interest. Generally a high yield bond comes with a higher risk and therefore will be ranked low by a rating agency.
A bond which pays a high yield due to significant credit risk.
Bond that has ratings of BB or lower and pays higher yields to offset its greater risk. See: Investment Grade; Junk Bond; Rating; Risk; Yield
These are corporate bonds with a credit rating of BB or below. This means that the agency which has rated the bond believes there is a higher possibility that the company which issued the bond may default on interest payments and possibly the repayment of the loan altogether. In order to make the bond attractive to investors the bond issuing company will pay a higher yield in comparison to an investment grade bond.
A non-investment grade bond issued by a company or sovereign borrower. Standard & Poor's investment grade starts at BBB-. With a low or non-existent rating, firms raising money in the bond markets will have to pay a far higher yield than investment grade paper. The so-called junk bond market is much more widely developed in the US than in Europe. Some corporates, especially emerging market corporates are constrained by the sovereign rating of that country, which may itself be non-investment grade.