High interest bonds have a higher rate of return than the typical bond products.
The exact definition of what constitutes high interest bonds will change over time, as the typical rates of return fluctuate with inflation and interest rates.
High interest bonds typically represent a higher level of risk to the investor than other bond products.
There is a fairly consistent inverse relation between the yield of a given bond and the risk associated with it as an investment.
Sometimes high interest bonds are called “junk bonds”.
This is because the risk of default is higher than on more reliable bonds, and the credit rating agencies do not rate them as very secure.
However, that doesn’t mean that they can’t be a valuable investment product.
Many investors can and do carry junk bonds as part of their overall portfolio, but make an effort to balance them with more secure bonds and other products, such as stocks.
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The two main agencies that rate the credit-worthiness of bonds are Standard & Poor’s and Moody’s.
The two agencies use different rating systems, but a BB from S&P or a Ba from Moody’s is typically an indication of high interest bonds that carry this characteristic higher risk of default.
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