A bond issue that has defaulted on interest or principal payments, and will thus trade at a large discount and a poor credit rating.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
A bond that has missed a scheduled coupon payment or has not paid the full principal at maturity. Because the sour bond is in default, it trades at a significant discount from its par value. There is a high risk that the buyer of a sour bond will not recover his/her investment, but if the bond is eventually repaid, he/she can receive a high return.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved