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 ?
The rules indicate that low/negative retained earnings, low/negative total assets or high levels of debt finance are symptomatic of a firm that has a junk rating. It is noted that similar risk factors have been identified in predictive models of corporate failure which utilise financial ratios as explanatory inputs [3, 4].
A junk rating can set off a wave of capital outflows because it automatically excludes its bonds from certain high-profile indexes.
This is the first time in a decade that the junk rating has been imposed.
The ECB is considering whether to enact rules that would allow asset-backed securities issued by Greek and Cypriot banks that carry a junk rating to be purchased by the ECB under its new purchase plan, as part of a package of measures aimed at boosting growth and inflation in the eurozone.
Moodys Investors Service cut Croatias to a junk rating of "Ba1' from 'Baa3', blaming the move on a stalled recovery, lack of budget discipline and the economy's vulnerability to external shocks.
dollar and the yen Wednesday in Tokyo as Moody's Investors Service affirmed its rating on Spain's government debt, allaying fears that the eurozone country could be cut to a junk rating.
Any rating changes stemming from the new ceiling, which is Moody's fourth-lowest junk rating, will be announced in the next week, according to yesterday's statement.
In a further blow to the already ailing bank, Standard & Poor's downgraded Bankia to junk rating. It also reduced the ratings of four other banks.
Lebanese banks hold about 70 per cent of the nation's debt which is rated B1 by Moody's Investors Service, four notches below investment grade, and B by Standard and Poor's, the fifth highest junk rating.
The company is rated Ba2 by Moody's Investors Service, two steps below investment grade, and BB- by Standard & Poor's, the third- highest junk rating.
Soon after, in November, Standard & Poor's Ratings Services downgraded its corporate credit rating to CCC, a junk rating that is just one notch above default.
S&P cut the long-term corporate credit ratings for GM and its GMAC finance arm by two notches to 'BB,' the second-highest junk rating.