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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.
Junk bonds are a high-risk investment, but they offer the potential for higher returns than investment-grade bonds. Junk bonds, also known as high-yield bonds, are best suited for investors who ...
The current yield, interest yield, income yield, flat yield, market yield, mark to market yield or running yield is a financial term used in reference to bonds and other fixed-interest securities such as gilts. It is the ratio of the annual interest payment and the bond's price:
High-yield bonds. Sometimes referred to as junk bonds, high-yield bonds offer higher interest rates to investors because they are considered greater credit risks than investment-grade bonds. High ...
Current Yield – But now consider how yield changes if the price of that same bond falls. If the bond mentioned above is resold for $800 it results in a current yield of 6.25%.
When yield spreads widen between bond categories with different credit ratings, all else equal, it implies that the market is factoring more risk of default on the lower-grade bonds. For example, if a risk-free 10-year Treasury note is currently yielding 5% while junk bonds with the same duration are averaging 7%, then the spread between ...
High-yield bonds (or junk bonds) are known for being high-risk, yet potentially high-reward, investments.They are usually offered by companies with little positive reputation, such as startups, or ...
After the returns upon all classes of investment-grade debt come the returns on speculative-grade high-yield debt (also known derisively as junk bonds). These may come from mid and low rated corporations, and less politically stable governments.