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.

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But before you go saying, 'What a load of rubbish', take a look at what Juliette Goggin and Stacy Sirk have to say in their new book, Junk Genius.