High-Yield Bond Definition
Learn the definition of high-yield bond and other ETF terminology from the etf.com glossary.
Learn more about High-Yield Bonds
A high-yield bond, also known as a junk bond, is a corporate bond that is rated below investment grade by credit rating agencies. These bonds are considered to be riskier than investment-grade bonds, but they also offer higher yields to compensate investors for the increased risk. High-yield bond ETFs invest in a portfolio of high-yield bonds, providing investors with a diversified exposure to this asset class. These ETFs can offer investors a higher income stream than ETFs that invest in investment-grade bonds. However, high-yield bond ETFs are also riskier than investment-grade bond ETFs. This is because high-yield bonds are more likely to default, meaning that the issuer may not be able to repay the principal or interest on the bonds.
