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Fixed income
High yield bonds
High yield bonds are debt securities with lower credit ratings than investment grade bonds. They offer higher yields to compensate investors for the increased risk of default. These bonds are typically issued by companies or entities considered to have a higher likelihood of failing to meet their debt obligations, which is reflected in their lower credit ratings.
High yield bonds are rated below BBB- by Standard & Poor’s (S&P) and Fitch. They are categorized into:
Corporate bonds: Issued by companies with less stable financial conditions or those undergoing restructuring.
Emerging market bonds: Issued by governments or corporations in developing countries, which often come with higher risks and yields.
As a higher-risk, higher-reward investment option within the fixed income market, but they require careful analysis to effectively manage the associated risks.