 |
Definition of 'High-Yield Bond'
A high paying bond with a lower credit rating than investment-grade corporate bonds, Treasury bonds and municipal bonds. Because of the higher risk of default, these bonds pay a higher yield than investment grade bonds.
Based on the two main credit rating agencies, high-yield bonds carry a rating below 'BBB' or from S&P, and below 'Baa' from Moody's. Bonds with ratings at or above these levels are considered investment grade. Credit ratings can be as low as 'D' (currently in default), and most bonds with 'C' ratings or lower carry a high risk of default; to compensate for this risk, yields will typically be very high.
Also known as "junk bonds".
|
 |
Investopedia explains 'High-Yield Bond'
All "junk" connotations aside, high-yield bonds are widely held by investors worldwide, although most participate through the use of mutual funds or exchange-traded funds. The yield spread between investment grade and high-yield will fluctuate over time, depending on the state of the economy, as well as company and sector-specific events.
Generally, investors in high-yield bonds can expect at least 150 to 300 basis points greater yield compared to investment-grade bonds at any given time. Mutual funds provide a good way to gain exposure without the undue risk of investing in just one issuer's junk bonds.
|
Video Definition
-
Despite their reputation, the debt securities known as "junk bonds" may actually reduce risk in your portfolio.
Read More »
-
We break down the stodgy stereotype to see what these investments can do for you.
Read More »
-
Learn about required yield and take a closer look at how various yields are calculated.
Read More »
-
-
Find out which bonds you should be investing in and when you should be buying them.
Read More »
-
Fixed-income investments can be part of your portfolio at any age. Find out how.
Read More »
-
Don't be fooled by the name - junk bonds may be for you if you know how to analyze them.
Read More »
-
Exposure to different asset classes is required to generate income, reduce risk and beat inflation. Find out how bonds can help.
Read More »
-
An investor's fixed-income portfolio can easily beat the average bond fund. Learn how and why!
Read More »
-
Recognizing a market bottom can lead to huge opportunities for an investor. We go over how you can spot the bottom so that you can reap the rewards.
Read More »
|
|
