High-yield Bond

High-yield bonds typically are bonds with credit ratings lower than investment grade bonds. Due to their higher risk of default, they pay a higher yield than investment grade bonds. The yield spread between investment grade and high-yield bonds fluctuates depending on the state of the economy, as well as company and sector-specific events. During prosperous times, the yield spread may become rather small, and may increase during periods of distress.

Investors can gain exposure to high-yield bonds via funds that invest in bonds.

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