A junk bond is a debt security issued by a company or government with a poor credit rating. Generally, these bonds are below investment grade.
For long-term bonds, a credit rating below “Ba3” or “BB-” is considered speculative and labeled a junk bond. Junk bonds offer higher yields because of the greater risk of loss to the investors.
The chart below shows the long-term bond ratings using the two most popular rating agencies, Moody’s and Standard & Poor’s.
