The hidden risks of junk bonds

Junk bonds have been one of the biggest beneficiaries of record-low interest rates over the past five years. Also known as high-yield, speculative-grade and sub-investment-grade, these bonds carry a rating lower than ‘BBB’ from a credit-rating agency such as Moody’s or Standard & Poor’s. They offer higher yields than safer investment-grade bonds, but come with a significantly higher risk of default.

As result, they have traditionally been a specialist area of the bond market. But the low yields available on other income investments have encouraged many investors to venture into this area for the first time.

The question is whether [...]

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