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 ?
Studies using actuarial approaches, such as Fons (1987) and Altman (1989, 1990, 1991, 1992, 1993), Long (1991), and Mood/s Special Report (1993), focus on the yield to maturity of low-grade bonds and compare implied default rates with actual default losses.
Another example, this study examines the distribution of January small stock and low-grade bond returns.
Returns on small-firm stocks and low-grade bonds are more highly correlated in January than in the rest of the year.
Risky-debt valuation models that do not incorporate interest-rate risk project that low-grade bonds will become more sensitive to equity market movements during recessions.
Because low-grade bonds typically have a junior standing in the issuing firm's capital structure and, more important, because their high returns are particularly vulnerable to a drop in earnings, these bonds have risk and return characteristics similar to those of both common stock and debt.
For example, Smirlock (1984/85) was able to identify the existence of this anomaly in low-grade bonds.
Green, 1991, "The Investment Performance of Low-grade Bond Funds," Journal of Finance (March), 29-48.
Keim, "Realized Returns and Defaults on Low-Grade Bonds 1977-1989," Journal of Finance (March 1991), pp.
The company has a moderate exposure to real estate and medium and low-grade bonds.
The company has a modest exposure to common stock, and medium and low-grade bonds.
0% for 1997; and -- The company has a conservative investment portfolio, with low exposure to medium and low-grade bonds.
The company has a modest exposure to medium and low-grade bonds.

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