High-Yield Bonds

High-yield bonds mean bonds that pay higher yields because they have lower credit ratings and higher risk. In simple terms, they are riskier bonds that offer higher potential income. High-yield bonds are important because they can show investor appetite for risk and the health of credit markets. When investors become cautious, high-yield bond prices may fall and yields may rise. For example, a company with heavy debt may need to issue high-yield bonds to attract investors. High-yield bonds are not the same as safe income investments. They can produce higher income, but they also carry higher default risk.