Junk Bonds

A bond with a sub-investment grade credit rating of BB+ or lower from Standard & Poor's Corporation or Ba1 or lower from Moody´s. Also known as speculative or high-yield debt. These bonds are issued by companies perceived to carry a high risk of never repaying the money loaned to them. In order to persuade investors to accept this risk, the interest rates offered by junk bonds can be much higher than those offered by many other types of bonds.