Difference between revisions of "Junk bond"

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The term "junk" is reserved for all bonds with Standard & Poor's ratings below BBB and/or Moody's ratings below Baa. Investment grade bonds are generally legal for purchase by banks; junk bonds are not.<ref>{{cite web|url=http://mockingbird.creighton.edu/english/fajardo/teaching/srp435/junkbond.htm|name=An Explanation of "Junk" Bond Ratings|org=Dow Publishing|date=June 4, 2012}}</ref>
 
The term "junk" is reserved for all bonds with Standard & Poor's ratings below BBB and/or Moody's ratings below Baa. Investment grade bonds are generally legal for purchase by banks; junk bonds are not.<ref>{{cite web|url=http://mockingbird.creighton.edu/english/fajardo/teaching/srp435/junkbond.htm|name=An Explanation of "Junk" Bond Ratings|org=Dow Publishing|date=June 4, 2012}}</ref>
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Organizations that issue high-yield debt include many U.S. corporations, certain U.S. banks, various foreign governments and a few foreign corporations.<ref>{{cite web|url=http://www.investinginbonds.com/learnmore.asp?catid=5&subcatid=19|name=What Are High Yield Bonds?|org=investinginbonds.com|date=March 6, 2009}}</ref>
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== References ==
 
== References ==

Latest revision as of 15:06, 7 February 2019

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Bonds are generally classified into two groups - "investment grade" bonds and "junk" bonds. A "junk bond" or high yield bond is one that is rated below investment grade when purchased. The credit rating of the companies issuing these bonds is relatively poor, meaning the bond issuer is more likely to default. Junk bonds have a higher risk of default than investment grade bonds, but they pay a higher yield to attract investors. The low credit ratings of the companies behind these bonds makes it difficult for them to acquire capital at an inexpensive cost. [1]

The term "junk" is reserved for all bonds with Standard & Poor's ratings below BBB and/or Moody's ratings below Baa. Investment grade bonds are generally legal for purchase by banks; junk bonds are not.[2]

Organizations that issue high-yield debt include many U.S. corporations, certain U.S. banks, various foreign governments and a few foreign corporations.[3]


References

  1. What Are Junk Bonds?. Morningstar.
  2. An Explanation of "Junk" Bond Ratings. Dow Publishing.
  3. What Are High Yield Bonds?. investinginbonds.com.