high-yield bond
Definition
Noun: A high-yield bond is a type of corporate debt security that offers a higher rate of interest because it carries a higher risk of default than investment-grade bonds. These bonds are typically issued by companies with lower credit ratings.
Usage
High-yield bonds are used by companies to raise capital, often for specific corporate activities like financing acquisitions. Investors purchase them for the potential of greater income, accepting the associated higher risk. - The company financed its expansion by issuing a high-yield bond. - Many institutional investors have a portion of their portfolio allocated to high-yield bonds.
Advanced Usage
- "Fallen angel": A bond that was originally issued with an investment-grade rating but has since been downgraded to a high-yield (speculative) rating.
- "Junk bond": A common, informal synonym for a high-yield bond, emphasizing its speculative nature.
Variants and Related Words
- Junk bond (n): A direct synonym for a high-yield bond.
- Speculative-grade bond (n): A more formal term for a bond with a credit rating below investment grade (BB+ and lower).
- High-yield debt (n): A broader category that includes high-yield bonds and loans.
Synonyms
- Junk bond
- Speculative-grade bond
- Non-investment-grade bond
Related Phrases
- High-yield market: The financial market where high-yield bonds are issued and traded.
- Credit rating: An assessment of the creditworthiness of a borrower, which determines if a bond is classified as high-yield.
Noun
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a (speculative) bond with a credit rating of BB or lower; issued for leveraged buyouts and other takeovers by companies with questionable credit
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