Also known as junk bonds. bonds rated by credit rating agencies as sub-investment grade (in other words, below BBB in the case of Standard & Poor's or below BAA in the case of Moody's). They tend to be fixed rate, with maturities of seven to ten years, usually with a bullet repayment at maturity. Some issues are structured as discount notes, that is, they do not pay cash interest for an initial period and are therefore issued at a discount to their final redemption value.
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USA
Also known as high-yield debt and junk bonds.
In finance, a high-yield bond, non-investment grade bond, speculative grade bond or junk bond is a bond that is rated below investment grade at the time of purchase. See credit rating. These bonds have a higher risk of default or other adverse credit events, but typically pay higher yields than better quality bonds to make them attractive to investors.
Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010.