junk bond meaning

  "junk bond" in a sentence
Noun: junk bond
  1. A (speculative) bond with a credit rating of BB or lower; issued for leveraged buyouts and other takeovers by companies with questionable credit
    - high-yield bond

Derived forms: junk bonds

Type of: bond, bond certificate

Encyclopedia: Junk bond

[American slang]
n. a low-rated corporate bond that pays higher interest because of greater risk.
• Don't put all your money into junk bonds.
• Junk bonds pay a lot of interest.

noun [C]

(Finance )

a type of bond that pays a high rate of interest because there is a lot of risk involved, often used if a company wants to raise money quickly in order to buy the shares of another company:

The company plans to sell $925 million of junk bonds to fund the acquisition.

investing in high-yield junk bonds

a junk bond fund

(= that invests money in these bonds)

A bond that offers a high rate of interest because it carries a higher than usual probability of default. The issuing of junk bonds to finance the takeover of large companies in the USA is a practice that developed in the 1970s and subsequently spread elsewhere.


leveraged buy-out.

A bond with a speculative credit rating of BB (S&P) or Ba (Moody's) or lower. Junk or high-yield bonds offer investors higher yields than bonds of financially sound companies. Two agencies, Standard & Poors and Moody's Investor Services, provide the rating systems for companies' credit.


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