Also referred to as a junk bond, a bond that is rated BB or below by Standard & Poor's, paying a higher interest rate and considered riskier than higher quality bonds.
A bond with a rating of BB or lower that pays a higher yield to compensate for the greater investment risk it represents to investors.
These are the lowest quality bonds. Bonds with credit ratings below BBB from Standard & Poor's or Baa from Moody's Investor Services are considered speculative because they have a greater chance of default than investment grade bonds. High-yield bonds are usually issued by smaller companies without long track records or by companies with questionable credit ratings. To compensate for the additional risk, issuers offer higher yields than investment grade bonds. In recent years however, junk-bond yields have declined as their popularity has increased and default rates have slowed. They are also called junk bonds.