Junk bond

A bond carrying a high risk of default. These are generally rated as BB or lower by the credit ratings agency. However, they pay much higher rates of interest than government bonds and are therefore used for speculative purposes. Junk bonds are often issued by smaller less established firms to fund their operations or by well known firms looking to raise money for leveraged buyouts. These are also called non-investment grade or high yield bonds.

This definition is for general information purposes only