Series 7: 2.9.3 High-Yield Or Junk Bonds

2.9.3  High-Yield or Junk Bonds

Non-investment grade bonds (BB+ credit rating or lower) are also known as junk bonds. Junk bonds are a type of unsecured or partially secured corporate bonds that typically offer significantly higher yields to compensate for their lower credit rating. For this reason, junk bonds are also known as high-yield bonds. Non-investment grade ratings are usually given to companies that do not have a long track record or that have a questionable ability to meet their debt obligations.

Like other bonds, junk bonds generate a steady stream of income from a stated coupon