High Yield Corporate Bonds

High yield corporate bonds are known as junk bonds. These are issued by companies who have speculative grade credit ratings.

These companies are known as Fallen Angels because they issued their bonds when they had a investment grade rating. Now, however, their ratings have been downgraded to speculative grade due to poor economics or their country has been downgraded. No company can be graded higher than its sovereign rating unless the debt is guaranteed by a foreign parent, etc.

In bankruptcy reorganisation, a high-yield bond will in all liklihood be converted to equity of a restructured company (invariably wiping out the previous shareholders.

Clearly junk bonds are highly volatile depending on teh economics of the company and / or its industry.