Definition

Noun: A high-yield, high-risk corporate bond that carries a credit rating of 'BB' or lower from major rating agencies. These bonds are typically issued by companies with weak financial profiles or for financing speculative activities like leveraged buyouts, making them more likely to default compared to investment-grade bonds.

Usage

Junk bonds are used by companies to raise capital when they cannot obtain an investment-grade rating. They offer higher interest rates to compensate investors for the increased risk of default. - The company financed its aggressive takeover using junk bonds. - Many investors were attracted to the high yields of junk bonds during the economic boom.

Advanced Usage

• "to be in junk bonds": to have invested in or to hold junk bonds.
  • His portfolio was heavily in junk bonds, which worried his financial advisor.
• "junk bond market": the specific financial market where these high-yield bonds are traded.
  • Volatility in the junk bond market can signal broader economic concerns.

Variants and Related Words

• High-yield bond: A synonym for junk bond, emphasizing the higher interest payments.
• Speculative-grade bond: Another formal term for a junk bond, highlighting its non-investment-grade status.
• Fallen angel: A bond that was once investment-grade but has been downgraded to junk status.

Synonyms

• High-yield bond
• Speculative-grade bond
• Non-investment-grade bond

Related Phrases

• Junk bond status: The condition of being rated as a junk bond.
  • The downgrade to junk bond status made it harder for the company to borrow money.
• Junk bond rally: A period of rising prices in the junk bond market.
  • The recent junk bond rally was driven by investors searching for yield.

Noun

1. a (speculative) bond with a credit rating of BB or lower; issued for leveraged buyouts and other takeovers by companies with questionable credit