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High-Yield Bond

Trading Term

Also known as a junk bond, this is a bond that is considered a credit risk by a Nationally Recognized Statistical Rating Organization, as indicated by a low bond rating (e.g., “Ba” or lower by Moody’s Investors Services, or “BB” or below by Standard & Poor’s Corporation). Because of the risk, a high-yield bond generally pays a higher yield (return) than a bond with an issuer that carries lower default risk.

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