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Diversification: Corporate bonds come in a wide variety of types, depending on maturity (short, medium and long) and rating quality (investment-grade or high-yield). A bond ETF allows you to buy ...
Corporate bond holders are compensated for this risk by receiving a higher yield than government bonds. The difference in yield - called credit spread - reflects the higher probability of default , the expected loss in the event of default, and may also reflect liquidity and risk premia; see Bond credit rating , High-yield debt .
A bond's market value at different times in its life can be calculated. When the yield curve is steep, the bond is predicted to have a large capital gain in the first years before falling in price later. When the yield curve is flat, the capital gain is predicted to be much less, and there is little variability in the bond's total returns over ...
Of course, the yield curve is most unlikely to behave in this way. The idea is that the actual change in the yield curve can be modeled in terms of a sum of such saw-tooth functions. At each key-rate duration, we know the change in the curve's yield, and can combine this change with the KRD to calculate the overall change in value of the portfolio.
Junk bonds, or high-yield bonds, are rated below BBB because they carry a higher default risk. But it’s important to note that companies with junk bonds aren’t just defaulting left and right ...
The yield curve inversion had markets tumbling amid concerns of a coming recession, but what is a "yield curve" and how (and/or why) does it invert? Bonds, yields, and why it matters when the ...
In finance, a high-yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a bond that is rated below investment grade by credit rating agencies. These bonds have a higher risk of default or other adverse credit events but offer higher yields than investment-grade bonds to compensate for the increased risk.
Yields on corporate bonds, both investment-grade and junk, are low. So are default rates, and credit spreads are historically tight. Put all that together, and it might be easy for an investor to ...