What are bonds? What are junk bonds?

Bonds are a type of debt security in which an investor loans money to an entity in exchange for interest payments over a specified period of time.

Bonds are generally issued by governments, corporations, or other entities to finance their operations.

Junk bonds, also known as high-yield bonds, are bonds with a credit rating that indicates a higher risk of default.

They offer higher yields than other bonds in order to compensate investors for the higher risk of default.

Examples of junk bonds include distressed debt, which are bonds issued by companies in financial distress, and emerging market bonds, which are bonds issued by companies in developing countries.

Speculative grade bonds, which are bonds issued by companies with a low credit rating, are also considered junk bonds.

Leveraged buyouts, which are debt securities backed by the assets of a target company, are also considered junk bonds.

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