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Finance
High-Yield Bond
A bond issued by companies with lower credit ratings that pays a much higher interest rate to compensate for higher risk.
High-yield bonds (also called junk bonds) are rated below investment grade. They offer higher returns but carry greater risk of default. Many hedge funds and income-focused investors allocate part of their portfolio to them.
It's the risky but tempting 'junk food' of the bond world — higher reward but you might get heartburn.
Real world: A startup or struggling retailer issues high-yield bonds at 8-12% interest because safer government bonds only pay 4%. Investors demand the extra yield for the chance the company might default.
💡 High-yield bonds can boost your income — but only if the company actually survives to pay you back.