Junk bonds

Junk bonds are debt securities issued by issuers with low credit ratings. They are rated below «investment grade» (worse than BBB- or Baa3). The key feature of these securities is the increased credit risk: Since the probability of default is significantly higher, investors demand a higher yield compared to top-rated government or corporate bonds.

These instruments enable companies with weak financial structures to raise debt capital in the market. They offer high potential returns but are subject to significant price fluctuations and carry the risk of partial or total capital loss for the investor.