junk bond definitionAccording to popular junk bond definition, these are bonds that are rated "speculative grade" or "below investment-grade", translating to BB grade or below by Standard & Poors, or Ba grade or below by Moody's. Junk bonds are also called high-yield bonds. These bonds normally have much higher yields due to the greater chance of default than in investment grade bonds. Companies with higher credit risk may issue below investment-grade bonds directly. Or, the bond issue may be originally issued as investment-grade, but may be reduced by the rating agencies into below investment-grade, junk bond status. These issues are also known as "fallen angels". In opposition to the "fallen angel" bonds, there are "rising star" bonds. These are bonds whose rating has been increased from junk bond status because of the issuing company's improving credit quality. |