Junk Bond
InvestingGlossary term
Definition
A high-yield bond with a credit rating below investment grade (BB or lower), issued by companies with higher default risk. Junk bonds offer significantly higher interest rates to compensate investors for the increased risk of the issuer failing to repay.
Related terms
- Corporate BondA debt security issued by a corporation to raise capital, paying regular interest to bondholders. Corporate bonds offer higher yields than government bonds but carry more risk. Credit ratings from agencies like Moody's and S&P indicate default risk.
- BondA fixed-income investment where an investor loans money to an entity (government or corporation) that borrows the funds for a defined period at a fixed interest rate.
- YieldThe income return on an investment, expressed as a percentage. For bonds, it's the interest payment divided by the price. For stocks, it's the annual dividend divided by the stock price.
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