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Junk bonds may not trade as frequently as investment-grade bonds, meaning you might have a harder time selling your bonds immediately or without taking a more substantial discount on the market price.
The yield spread on the ICE BofA U.S. High Yield Index , a commonly used benchmark for the junk bond market, rose to over 400 basis points for the first time since December 2020 on Monday.
The problem is that junk bonds are. 24/7 Wall St. tracks the spreads that corporations have to pay above Treasury rates to fund their cost of borrowing. This is one key barometer for measuring the ...
In finance, a high-yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a bond that is rated below investment grade by credit rating agencies. These bonds have a higher risk of default or other adverse credit events but offer higher yields than investment-grade bonds to compensate for the increased risk.
[40] At end of the trading day on 9 March the yield spread for junk bonds reached 6.68% from a low of 3.49% on 6 January, as sellers attempted to lure cautious traders with higher yields. The bonds of firms in the energy sector, who make up about 10% of the total junk bond market and were particularly exposed to the Saudi-Russian oil price war ...
Yield spread can also be an indicator of profitability for a lender providing a loan to an individual borrower. For consumer loans, particularly home mortgages, an important yield spread is the difference between the interest rate actually paid by the borrower on a particular loan and the (lower) interest rate that the borrower's credit would allow that borrower to pay.
Sometimes referred to as junk bonds, high-yield bonds offer higher interest rates to investors because they are considered greater credit risks than investment-grade bonds. High-yield bonds ...
(See "Basis point spread" in table to right.) Looking at rated bonds for 1973–89, the authors found a AAA-rated bond paid 43 "basis points" (or 43/100 of a percentage point) over a US Treasury bond (so that it would yield 3.43% if the Treasury yielded 3.00%). A CCC-rated "junk" (or speculative) bond, on the other hand, paid over 7% (724 basis ...