Junk bonds offer investors a higher yield than “investment grade” bonds, with a higher risk of default. They are also known as non-investment grade bonds, speculative grade bonds, high yield bonds, “high opportunity bonds” or even “fallen angels”. […]
Bond Basics
What Happens When a Corporate Bond Defaults?
Corporate bonds have a much higher yield than treasury securities. The higher interest of course is to compensate for the default risk corporate bonds possess. […]
Types of Interest Payments
While the definition of interest remains the same no matter how that interest is paid, in order to suite the needs of both the entity issuing a bond, and the buyer of that bond, different bonds pay out their interest payments in different ways: […]
Yield to Maturity – What it is and How it Works
When investing in a bond that is trading at a premium or discount, the current yield is a misleading indicator for the total return you can expect. If you buy a bond trading at a discount, you will be paid the face value when held to maturity. As the face value is greater than… […]
Treasury Inflation Protected Securities (TIPS) – What They are and How They Work
Treasury Inflation Protected Securities (TIPS for short) are bonds issued by the US Treasury whose principal and coupon interest payments fluctuate along with inflation. More […]
What are the Taxes on Bond Mutual Funds?
Like with individual bonds, investments in bond mutual funds are taxed based on the type of bond the fund holds. If a bond fund only […]
Bond Credit Ratings – What They are and How they Work
Bond credit ratings are the equivalent to an individual’s credit score and are designed to guage the risk that a bondholder will not receive a portion or […]
Interest Rates and Bond Prices – An Inverse Relationship
What is the the relationship between interest rates and bond prices? As one goes up, the other goes down. Why do they have an inverse relationship? […]