High Yield Or Junk Bonds

Topics:
Equity
Tags:
Bond,
Finance,
Investment
Source:
The Financial Pipeline

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Overview: A high yield, or junk, bond is a bond issued by a company that is considered to be a higher credit risk. The credit rating of a high yield bond is considered speculative grade or below investment grade. This means that the chance of default with high yield bonds is higher than for other bonds. Their higher credit risk means that junk bond yields are higher than bonds of better credit quality. Studies have demonstrated that portfolios of high yield bonds have higher returns than other bond portfolios, suggesting that the higher yield more than compensate for their additional default risk. This article deals with equities and bonds.

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