High Yield-Bonds Essay

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High Yield-Bonds A bond is debt to whoever sells the bond to an inventor. If you buy an IBM bond, you are loaning money ($1000) to IBM instead of a bank loaning money to them. Just like a bank, you are going to charge IBM interest on your money, as well as a return of principle when the loan is due (ten years later). The company does not go to the bank to borrow the money, because the bank will rate the company as a high risk company. Hence, banks are really tight with their money. High yields bond investment relies on an credit analysis in that it concentrates on issuer fundamentals, and a "bottom-up" process. It focuses more on "downside risk default and the unique characteristics of the issuer. In a portfolio of high yield bonds,…show more content…
This was a result of a major chance in business conditions, or assumption of too much financial risk by the issuer. Different types of bonds Along with the many different characteristics of bonds such as, the way the pay their interest, the market they are issued in, the currency they are payable in, protective features and their legal status. Bond issuers may be governments, corporations, special purpose trusts or even non-profit organizations. Usually it is the type of issuer or the particular nature of a bond that sets it apart in its own category. Government Bonds Supranational Agencies A supranational agency is like a World Bank, that leaves assessments or fees against its member governments. The most important factor is the support and taxation power of the underlying national governments that allow these organizations to make payments on their debts. National Governments The "central or national governments also have the power to print money to pay their debts, as they control the money supply and currency of their countries. This is one reason why investors consider national governments (bonds) of the most industrial countries to be almost "risk free" from a default point. Quasi-Government Issuers Many government related institutions issue bonds, some supported by the revenues of a specific institution and some guaranteed by a government sponsor. For example, in Canada they have a bank that issue bonds that are guaranteed by the
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