Recent Examples of junk bond from the Web
Chesapeake Energy sparked Wall Street’s lust for shale junk bonds, and Netflix has signed commitments to make $14bn of future payments to studios and artists to buy creative content.
Peltz grew a vending machine company, Triangle Industries, by acquisitions that were bankrolled with junk bonds from Michael Milken.
But buying a four-speed washer-dryer and then celebrating with an in-store purchase of some junk bonds?
These example sentences are selected automatically from various online news sources to reflect current usage of the word 'junk bond.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
First Known Use of junk bond
Financial Definition of JUNK BOND
What It Is
How It Works
A junk bond works the same as most other bonds -- an investor purchases a bond from a bond issuer with the assumption that the money will be paid back when the bond reaches its maturity date. The difference between an "investment grade" bond and a "junk" bond is that the junk bond issuer may not be able to repay the original principal.
Bonds often receive this type of low rating when the corporation, municipality or other entity that issued the bond is facing financial trouble. In these cases, the credit risk on the bonds is fairly high -- in other words, there is a relatively decent chance that the junk bond issuer will have trouble fulfilling its repayment obligations (including interest and principal). However, many junk bonds also pay higher yields than investment-grade bonds in order to attract investors.
Why It Matters
While junk bonds can actually be a savvy addition to a portfolio, they're not for everyone. The junk bond market is largely dominated by institutional investors, so an individual would need to be willing to spend time researching and analyzing. Investors wanting to diversify their portfolio with junk bonds might also want to consider investing in a junk bond fund.
JUNK BOND Defined for English Language Learners
Definition of junk bond for English Language Learners
business : a type of bond that pays high interest but also has a high risk
Seen and Heard
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