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junk bond

The Columbia Encyclopedia, Sixth Edition | 2008 | The Columbia Encyclopedia, Sixth Edition. Copyright 2008 Columbia University Press. (Hide copyright information) Copyright

junk bond a bond that involves greater than usual risk as an investment and pays a relatively high rate of interest, typically issued by a company lacking an established earnings history or having a questionable credit history. Junk bonds became a common means for raising business capital in the 1980s, when they were used to help finance the purchase of companies, especially by leveraged buyouts ; the sale of junk bonds continued to be used in the 1990s to generate capital. See also Milken, Michael .

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