"Junk bonds" refer to high-risk bonds that are issued by companies with poor credit ratings. They are called "junk" because these bonds are considered to be of lower quality and have a higher likelihood of defaulting or not being repaid.
Full definition
One - year returns
of junk bond funds averaged 20 % in 2003 after a two - year slump, tracking the stock market rebound.
It's hard to argue that the modest fall
in junk bond prices suggests that a larger correction is imminent.
If you decide to pour your entire life savings into a high yield
junk bond fund or stock that I mention and it tanks, don't come crying to me.
Worst of both worlds in exchange for yield:
junk bond yields if things are good, stock market losses if things are bad.
Compared to
junk bond ETFs, which place investors in the most speculative corner of high - yield investing, utilities provide similar yields with much more creditworthiness.
With junk bond managers looking to diversify their portfolios, some may be in the market for a large tech deal.
Bonds issued by companies with low credit quality are high - yield bonds, also
called junk bonds.
He lost money because a lot of other funds have made money gambling on
corporate junk bonds that are yielding about 6.5 % now.
Some large financial institutions, whether for regulatory or business reasons, can't
buy junk bonds.
Some of the bonds that come due in the next 12 months were trading at prices that offered hearty investors a 25 % to 35 % yield, one
junk bond manager told us.
However, little did i know that all those homes and more were rolled up
into junk bonds.
However, the interest rate isn't necessarily the same thing as some bonds may have higher yields do to the potential for defaults
like junk bonds for example.
A second reason for looking
at junk bonds is that they may be a more sensitive indicator, perhaps a more sensitive leading indicator, of economic conditions than higher - grade bonds.
Also, the default rate may reach or exceed the previous peak in 2002 if the economy remains weak, suggesting major declines in
junk bond prices.
Particularly
when junk bond prices get so high that they are likely to be called.
Within bonds there are
also junk bonds, or high - yield bonds, that give higher returns, but are also riskier.
In a leveraged buyout, a company would raise a massive amount of capital by
selling junk bonds to the public.
Most bonds (
not junk bonds) represent a less risky investment than most stocks, which means that stocks have to offer a higher return as a premium for increased risk.
In fact, I would bet good money that
junk bond investors will wake up one day and find that the value of their holdings will be down 40 - 50 % overnight.
Hold a mix of safer government bonds along with corporate and higher -
risk junk bonds to balance out safety and higher returns.
While junk bonds may not represent a systemic risk as credit derivatives did during the financial crisis, they can be one of the more effective leading economic indicators.
The theory pushed was that
junk bonds offered higher returns but with a lower risk thanks to low default rates.
One more sign: premiums paid for loan participation and
junk bond closed - end funds.
Quality is paramount in our selection process and we
avoid junk bonds, mortgages and derivatives.
What interest rate you'd want to get to make this investment which is riskier than
junk bonds attractive to you?
Understand why investors are
fleeing junk bonds amid global economic uncertainty, and learn why investment - grade bonds might be a better choice in 2016.
These funds do it all, from private equity - style investments in small companies to leveraged
junk bond investments you can't find anywhere else.
-- Owners of
junk bonds need to be careful as to what they own and be sure in their timeframe for ownership.
He used to make runs at companies
via junk bonds and other tools of leverage.
Municipal junk bonds are out performing both the senior loan and fixed rate corporate high yield segments of the market.
Moreover, this is not a
pure junk bond as the managers are more cautious and flexible by seeking better opportunities.
We would rather buy an out - of - favour and cheap «A» bond than a highly sought after and
overpriced junk bond.