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.

Related Terms

Yield, Corporate Bond, Asset Allocation