High-Yield Bonds

High-yield bonds, commonly known as junk bonds, have lower credit ratings than investment-grade bonds, which causes them to have higher interest rates. Due to their increased default risk, high-yield bonds reward investors with a larger yield than investment-grade bonds. High-yield debt is typically issued by start-up businesses or capital-intensive organizations with high debt ratios. However, some high-yield bonds are fallen angels, or bonds that lost their stellar credit ratings.