Investing term

What is High-yield (HY) / Junk bond?

Corporate bonds rated below investment grade — companies with material default risk that pay much higher coupons to compensate.

High-yield bonds — bluntly called junk bonds — are corporate bonds rated below investment grade, issued by companies with real risk of not paying. They offer much fatter coupons to compensate for that danger. They behave more like stocks than safe bonds, tending to fall hard in recessions just when you'd want your bonds to be a safe haven.

For example

A shaky company's bond yields 9% versus 4% for a safe government bond — the extra 5 points is your pay for taking on serious default risk.

High-yield (HY) / Junk bond is taught hands-on in Stage 19 — Beyond Stocks.

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Related terms

ASMLDutch semiconductor-equipment company that makes the EUV lithography machines every advanced chip is manufactured on — a global monopoly with no US peer.Bond ladderA portfolio of bonds with staggered maturities — one matures every year (or every few years) so cash continuously becomes available.CryptocurrencyDigital assets recorded on a blockchain — Bitcoin, Ethereum, etc. Highly volatile and not backed by cash flows or governments.Currency hedgingAn overlay used by some international ETFs to remove the effect of currency moves, so you get the foreign stock return in your home currency.
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