Investment Grade versus High-Yield or Junk Bonds. Investment-grade corporate High yield Figure 2. Each week, Zack's e-newsletter will address topics such as retirement, savings, loans, mortgages, tax and investment strategies, and more. Investors regard them as low quality. At first glance, it looks like more debt is rated investment grade vs. high yield, but within the investment grade category BBB went from 38% to 53% of all rated debt outstanding. Bonds that are believed to have a lower risk of default and receive higher ratings by the credit rating agencies, namely bonds rated Baa (by Moody's) or BBB (by S&P and Fitch) or above. “In high yield bonds there is no convergence in spreads towards pre-pandemic levels, unlike in investment grade. Corporate bonds come in two forms: investment grade and non- investment grade. High yield returns are represented by the Salomon Smith Barney High Yield Composite Index from 1980 through 2002, the Credit Suisse High Yield Index (DHY) from 2003 through 2013. Standard & Poor's and Fitch assign bond credit ratings of AAA, AA, A, BBB, BB, B, CCC, CC, C, D. C… High yield and investment grade represent opposite ends of the spectrum for bond ratings. In 2016, Henkel issued a €500m two-year bond with a yield of negative 5bps while Sanofi raised €1bn of three-and-a-half-year debt at the same yield. Moreover, for an institutional, high yield debt in a worsening environment can become a junk bond,” he said, point out that it still has downsides, such as downgrades and loss of value. But how does a bond issue take place? finance #3 image by Adam Borkowski from Fotolia.com. One of the benefits of high-yield bond investing is that investors gain exposure to an asset class that does not exhibit the same price volatility as the equity markets but can reap similar returns. High-yield bond or junk bonds are bonds issued by companies with a below–investment-grade credit rating of BB+ or lower. NYSE and AMEX data is at least 20 minutes delayed. High-yield bonds offer a premium to investment-grade bonds Notes: Yield data are as of December 31, 2018, beginning January 30, 1987. The credit rating is a financial indicator to potential investors of debt securities such as bonds. SF Deals Spreads. IG Deals; High Yield. Keep Me Signed In What does "Remember Me" do? Bond yield refers to the return realized on a bond. She works as a journalist who has contributed to The Motley Fool and InvestorPlace. High-yield (also referred to as "non-investment-grade" or "junk" bonds) pertains to bonds rated Ba1/BB+ and lower. Investment-grade bonds are issued by companies that are highly solvent, while high-yield bonds indicate that their issuers have a lower credit rating, due to a number of factors, including weaker competitive position in the sector, smaller size or lack of operational diversification or more aggressive dividend or indebtedness policies. Visit performance for information about the performance numbers displayed above. Several European investment grade issuers have taken the unprecedented steps of issuing bonds at negative yields. A bond is a debt instrument used by companies as a source of financing. The bond ratings assigned by these agencies determine whether a bond is investment grade or high-yield. Under normal economic conditions, high-yield bonds generate returns that are between 300 and 400 basis points higher than U.S. Treasuries with similar contract durations. Logos for Yahoo, MSN, MarketWatch, Nasdaq, Forbes, Investors.com, and Morningstar, Charles Schwab: High-Yield Bonds — Extra Income, but Added Risk, Fidelity Investments: Bond Prices, Rates and Yields, Treasury Direct: Treasury Securities and Programs. Ratings are used as benchmarks by investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system.     Their ratings measure issuer solvency and the probability of default on financial commitments. With Ian Watson. Every investment … IG Spread by Rating; Spread Analytics; High Yield. It is due to investors demanding a higher yield to compensate for the higher credit risk in holding non-investment-grade bonds. Speculative-grade notes returned 1.93 percent this month, bringing year-to-date gains to 3.63 percent, according to Bank of America Merrill Lynch index data. 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