Monday, December 27, 2010

High Yield Bond

A high yield bond is a bond which offers a higher rate of interest, usually in recognition of the relatively higher credit risk perceived by the market. Often so-called high yield bonds (sometimes referred to as junk bonds) will have a sub-investment grade credit rating (i.e. less than a BBB rating from Standard & Poor's). There are funds that invest specifically in high yield bonds, and are able to add value by performing rigorous analysis on the borrowers and the debt structure, as well as diversify the portfolio by holding a larger range of securities, thereby spreading the risk somewhat.

Synonyms: Junk bond, High yield debt, Sub-investment grade

Comments?
If you have any questions, or disagree with the definition, or if you have anything to add then please do add your comments in the box below.

No comments:

Post a Comment