junk bond

Junk Bond

A bond rated BB or lower because of its high default risk. Also known as a high-yield bond, or speculative bond.

Notes:

These are usually purchased for speculative purposes. Junk bonds typically offer interest rates three to four percentage points higher than safer government issues.

See also: Bond, Bond Rating, Default Risk, Stub, Vulture Fund

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Junk bond

A bond with a speculative credit rating of BB (S&P) or BA (Moody's) or lower. Junk or high-yield bonds offer investors higher yields than bonds of financially sound companies. Two agencies, Standard & Poors and Moody's Investor Services, provide the rating systems for companies' credit.

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junk bond

A high-risk, high-yield debt security that, if rated at all, is graded less than BBB by Standard & Poor's or BBB3 by Moody's. These securities are most appropriate for risk-oriented investors. Also called high-yield bond.