Junk Bond

A junk bond is a type of high-yield bond issued by companies with lower credit ratings, meaning they are considered riskier investments. Because of the increased risk of default, these bonds offer higher interest rates to attract investors. While they can provide the potential for greater returns, there’s also a higher chance that the issuer may fail to make interest payments or repay the principal. Junk bonds are often used by companies looking to raise capital quickly or by investors seeking higher income, but they come with increased risk compared to investment-grade bonds.