Credit · Core
Junk Bond
A junk bond is a high-yield, below-investment-grade credit — more equity-like default risk, still quoted in spread and price.
Definition
Rated BB+ / Ba1 or below (or unrated equivalent). Coupons compensate for default and illiquidity. The market trades on price, spread, and the default cycle, not on a Treasury-like duration story alone.
Why it matters
HY is a leveraged bet on growth and credit conditions. Correlation to equities rises in stress.
Case
2020 March HY OAS blew out and snapped back on Fed facilities. 2016 energy HY was a sector default cycle. Same bucket, different loss.
How to read it
Spread, duration, and the default/recovery assumption. CCC vs BB is not one asset class.
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