High Yield Bond

High yield bonds, sometimes referred to as “junk bonds”, are bonds issued by companies rated sub-investment-grade, or Ba1/BB+ or below. Because of their low ratings, high-yield bonds have higher default rates than their investment-grade peers and come with higher yields, hence the term. The term is generally used to describe corporate bonds; it is not usually applied to describe bonds issued by sub-investment-grade rated sovereigns. The latter are usually included in the emerging markets asset class.