Investors typically group bond ratings into 2 major categories: Investment-grade refers to bonds rated Baa3/BBB- or better. High-yield (also referred to as "non-investment-grade" or "junk" bonds) pertains to bonds rated Ba1/BB+ and lower.
A junk bond refers to high-yield or noninvestment-grade bonds. Junk bonds are fixed-income instruments that carry a credit rating of BB or lower by Standard & Poor's, or Ba or below by Moody's Investors Service. Junk bonds are so called because of their higher default risk in relation to investment-grade bonds.
Junk Bond rates are historically low, around 4%. This is less than half of the historical average rate (around 9%). Junk bonds (like most other interest rates) tend to spike with general market instability.
Standard & Poor's defines the 'CCC' issue credit rating as follows: "An obligation rated 'CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
A junk bond is debt, known as a corporate bond, issued by a company that does not have an investment-grade credit rating. Junk bonds are also known as high-yield bonds because the interest payments are higher than for the average corporate bond.Jan 25, 2022
- Junk bonds, also known as high-yield bonds, offer investors higher yields than more highly rated bonds in exchange for taking on greater default and liquidity risks.
How Do Investors Buy Junk Bonds?Individual bonds: If you have the cash available, you may be able to invest directly in individual bonds with your brokerage account. ... ETFs: These funds are bought and sold like stocks and give you exposure to many bonds at once.More items...
However, because junk bonds are so speculative, a bond fund might be a better choice. Because it holds a diversified portfolio, it carries less risk. It's highly liquid — can be sold at any time.Sep 30, 2020
This is because they have higher yields and shorter maturities. Interest rates are apt to change less over a shorter period. The market behavior of junk bonds is more in tune with overall changes in the economy, such as a recession. Junk bonds tend to act more like stocks in their market behavior than other bonds.
'CCC' National Ratings denote a very high level of default risk relative to other issuers or obligations in the same country or monetary union.
Rather than measuring perceived levels of corruption, the CCC Index evaluates and ranks countries based on how effectively they are able to combat corruption. Countries with a higher score are deemed more likely to see corrupt actors prosecuted and punished.Jun 14, 2021
S&P Global Ratings are available in S&P Net Advantage. Select Credit Ratings under Fixed Income from the company profile. You can also find S&P ratings in WRDS. Choose Compustat - Capital IQ, then Capital IQ, then Credit Ratings.Jul 27, 2021