A junk bond, also known as a high-yield bond or speculative bond, is a type of bond issued by companies or governments with a higher risk of defaulting on their debt obligations. These bonds are considered "junk" because they have a lower credit rating than investment-grade bonds.

Companies or governments that issue junk bonds typically have a higher level of financial risk, which is reflected in the lower credit ratings assigned by credit rating agencies. The lower credit rating indicates a higher probability of default or failure to make interest or principal payments on time.

Investors who purchase junk bonds are aware of the higher risk involved and demand a higher yield or interest rate in return for taking on this risk. The higher yield compensates investors for the possibility of not receiving full repayment.

Junk bonds can be attractive to investors seeking higher returns, but they also come with increased volatility and a higher potential for loss. It is important for investors to carefully evaluate the creditworthiness of the issuer and consider the associated risks before investing in junk bonds.

A junk bond, also known as a high-yield bond, is a debt security issued by companies or governments with a higher risk of default compared to investment-grade bonds. These bonds are typically rated below investment-grade by credit rating agencies due to the issuer's weaker financial health or uncertain prospects. Despite the higher risk of default, junk bonds offer higher interest rates to compensate investors for the increased risk. Investors in junk bonds seek higher yields with the understanding that there's a greater chance of losing their investment if the issuer fails to meet its financial obligations.