DMPQ- What are junk bonds?

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According to SEBI, Junk bonds are high yield bonds issued by low rated companies.   Junk bonds are a high-yielding debt instrument without an investment grade (noninvestment-grade bond).  These bonds carry a credit rating of BB and lower, because they have a higher risk of default. Typically, these bonds also give higher returns as opposed to investment grade bonds, making the attractive to investors.   The Securities and Exchange Board of India (SEBI) allowed companies to raise funds by issuing junk bonds or those below investment grade in 2007.

 

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