Junk Bond

What is Junk Bond.?

A junk bond is more or less a colloquial term for a non investment or high-yield grade bond. They usually tend to be what could be aptly described as fixed-income instrument that come with a BB rating (or lower by Standard & Poor’s, or Ba or below by Moody’s).

Ads by Google

Junk Bonds were named so due to their default risk with respect to investment grade bonds.

That definition is pretty much self evident that junk bonds are usually pretty risky investments, but often come with speculative appeal as they provide much higher yields as compared to safer bonds.

A junk bond issued by a company that manages to boost its performance and subsequently has its credit rating improved can generally expect a remarkable price appreciation.

Edited and Updated 15th February 2014

You can leave a response, or trackback from your own site.

Leave a Reply

You must be logged in to post a comment.

Powered by WordPress