High-yield bond

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High-yield bond

High-Yield Bond

A bond with a low rating. Bonds rated less than Baa3 by Moody's or BBB- by S&P or Fitch are considered high-yield bonds. They have higher yields because they have a higher risk of default on the part of the issuer. High-yield bonds are considered sufficiently high-risk that the law does not allow banks to invest in them. They are also called low-grade bonds, and, informally, junk bonds.

high-yield bond

See junk bond.

High-yield bond.

High-yield bonds are bonds whose ratings from independent rating services are below investment grade.

As a result, to attract investors, issuers of high-yield bonds must pay a higher rate of interest than the rates that issuers of higher-rated bonds with the same maturity are paying. The higher rate translates to more income, which is the higher yield.

High-yield bonds may also be described, somewhat more graphically, as junk bonds.

References in periodicals archive ?
AB is significant in the bond market especially in managing high-yield bonds globally.
Yesterday's washout on the equity market was thus not matched by a correction on the US high-yield market, and the Merrill Lynch US high-yield bond index only gave back Tuesday's gains, closing just 0.12 per cent below the all-time high.
* High-Yield Bonds: Only for Long-Term, Non-Squeamish Investors
The study, conducted by the Global Capital Markets Group, covers high-yield bond deals closed globally between 2012 and 2015, drawing on data from Proskauers extensive proprietary database of more than 1,500 high-yield deals since 2011.
Dubai -- High-yield bond, or junk bond, issuance in the Europe Middle and Africa (EMEA) region hit $31 billion in the first quarter of 2015, slightly ahead of issuance volumes of $29 billion in the same quarter in 2014, Moody's Investors Service said.
Even more cautious investors might consider SPDR BarCap ST High Yield Bond ETF (SJNK), which invests in high-yield bonds that mature in three years or so.
Annual returns on high-yield bonds between 1994 and 2012 have been almost uniformly positive, ranging from the low single digits to a high of 61.2 percent (2009).
All other factors remaining the same, if market rates were to have risen by, say, 1%, investment-grade bond yields would have moved from 2% to 3-a 50% increase in yield-while high-yield bonds would have moved from 6.3% to 7.3%, an increase in yield of just 16%.
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His clients are mostly diversifying into high-yield bonds, bank loans, emerging market debt and high-dividend equities.
FINRA's Investor Alert, "The Grass Isn't Always Greener--Chasing Return in a Challenging Investment Environment," was prompted by significant recent inflows into investments like high-yield bond funds, floating-rate loan funds and structured retail products.
According to available figures, the percentage of high-yield bonds trading at distressed levels has dropped to the lowest level since April.