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Definition of 'High-Yield Bond Spread'
The percentage difference in current yields of various classes of high-yield bonds (often junk bonds) compared against investment-grade corporate bonds, Treasury bonds or another benchmark bond measure. Spreads are often expressed as a difference in percentage points or basis points (which equal one-one hundredth of a percentage point).
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Investopedia explains 'High-Yield Bond Spread'
High-yield spreads are used by investors and market analysts to evaluate the overall credit markets. Higher spreads indicate a higher default risk in junk bonds, and can be a reflection of the overall corporate economy (and therefore credit quality) and/or a broader weakening of macroeconomic conditions.
The higher current yields of junk bonds reflects their greater risk of default to the investor than investment-grade bonds.
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Despite their reputation, the debt securities known as "junk bonds" may actually reduce risk in your portfolio.
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Is the bond you're buying investment grade, or just junk? Find out how check the score.
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