Junk bonds, also known more respectfully as high-yield securities, are debt instruments that are issued by corporate borrowers and which the major bond-rating agencies say are less than "investment grade." A corporate bond is considered "junk" if it is rated as BaA or lower by Moody's or Ba3 or lower by Standard and Poor's bond-rating services. Bond ratings measure the riskiness of bonds (that is, the chance that the issuer will be unable to make …
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showed last 75 words of 1134 total
…percent above treasuries. If the yield spread on a junk bond shrinks below four percent, it probably isn't the best time to invest in junk bonds. Another thing to check for prior to investing in a junk bond is the default rate on junk bonds. Checking Moody's website provides an easy way to track this default rates for junk bonds. This is the information value that can be gained by potential investors in junk bond.