High-yield bonds (also referred to as “junk” bond) are essentially a corporate bond, but one that is issued by a company with poor financial health. High-yield bonds are more likely to default, and as such, pay a higher yield than investment-gradeor government
bonds to compensate investors for their risk.
While issuers of corporate bonds tends to be companies that are financially sound, issuers of high-yield debt tend to be start-up companies or capital-intensive firms with high debt ratios. In some casehigh-yield bonds are issued by fallen angels that lost their good credit ratings. Of all bond categories, investing in high yield binds carries the most risk. For example, in 2008, high-yield bonds as an asset class lost 26.17% of their value in just one year.