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What is a high-yield bond?


Is the return rate for the high-yield bond fixed? Why is it so high (3-yr +8-13) compared to the normal bonds? Is it risky?

the higher the yield on a security, the higher the risk. High yield bonds are generally in reference to bonds that are non-investment grade, or have a "junk bond" status. It means the probability of default (as defined by the rating agencies) is higher than an investment grade bond. Remember it is the yield to worst that is indicative of the market's percieved risk of the security.

usually it is corporate paper of mid to long term duration
they have also been called junk bonds. they can be below investment grade but then there was a time enron had high yield investment grade bonds too!

Ahigh-yield bond (non-investment grade bond or junk bond) is a bond that is rated below investment grade at the time of purchase. These bonds have a higher risk of default or other adverse credit events, but typically pay higher yields than better quality bonds in order to make them attractive to investors.

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