Definition of High-yield bond:
Alternative term for junk bond.
High-yield bonds (also called junk bonds) are bonds that pay higher interest rates because they have lower credit ratings than investment-grade bonds. High-yield bonds are more likely to default, so they must pay a higher yield than investment-grade bonds to compensate investors.
Issuers of high-yield debt tend to be startup companies or capital-intensive firms with high debt ratios. However, some high-yield bonds are fallen angels that lost their good credit ratings.
How to use High-yield bond in a sentence?
- High-yield bonds offer investors higher interest rates and potentially higher long-run returns than investment-grade bonds but are far riskier.
- In particular, junk bonds are more likely to default and display much higher price volatility.
- These bonds have credit ratings below BBB- from S&P, or below Baa3 from Moody's.
- High-yield bonds, or "junk" bonds, are corporate debt securities that pay higher interest rates because they have lower credit ratings than investment-grade bonds.
Meaning of High-yield bond & High-yield bond Definition