Junk bonds: are they really “trash”?
In the broad and intricate universe of bonds, junk bonds are one category among many. Junk bonds, also referred to as high-yield bonds or speculative bonds, represent one of the numerous categories of corporate debt securities: these are typically issued by companies or firms burdened with heavy debt or those carrying a speculative level rating (which are usually in a start-up phase). They offer higher interest rates compared to regular corporate bonds due to their increased risk and lower credit ratings. It is important to remember that, just because a security offers higher returns, it does not necessarily mean it is superior to others: there is a common misconception that higher risk always yields higher returns. The truth is, while there is indeed a positive correlation between risk and return,…
