Define: Junk Bond

UK Accounting Glossary

Definition: Junk Bond



Advertisement



Full Definition of Junk Bond


A junk bond is any bond that is rated below investment grade (BB or lower) by Moody’s or Standard & Poor’s due to the high risk of default. A junk bond is also referred to as a high yield bond. Prior to 1977, every junk bond was a previously investment-grade bond for a company that had seen its credit quality erode. In that year, Bear Stearns underwrote an original-issue bond that started with a junk rating. Drexel Burnham Lambert quickly followed suit with a series of junk bond issues for companies that had been locked out of the bond market. Michael Milkin, who is often referred to as the junk bond king, led the Drexel Burnham junk bond initiative. The junk bond market peaked in 1989 when it was depressed by a series of issuer defaults. Many corporate bond issues today are given junk bond or high-yield status, and even blue-chip stocks have seen their bonds rated junk.


Advertisement




Cite Term


To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
https://payrollheaven.com/define/junk-bond/
Modern Language Association (MLA):
Junk Bond. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. April 04, 2020 https://payrollheaven.com/define/junk-bond/.
Chicago Manual of Style (CMS):
Junk Bond. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/junk-bond/ (accessed: April 04, 2020).
American Psychological Association (APA):
Junk Bond. PayrollHeaven.com. Retrieved April 04, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/junk-bond/

Definition Sources


Definitions for Junk Bond are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 9th February 2020.