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Individual Bonds: High Yield

High yield (non-investment grade) bonds are from issuers that are considered to be at greater risk of not paying interest and/or returning principal at maturity. As a result, the issuer will offer a higher yield than a similar bond of a higher credit rating and, typically, a higher coupon rate to entice investors to take on the added risk.

Reasons to consider high yield bonds

  • Higher yields
  • Capital appreciation potential

Find high yield bonds

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What makes high yield corporate bonds different from investment grade corporate bonds?

Lower credit ratings
High Yield Bonds have lower ratings due to the potentially greater risk involved. This means that interest payments may not be made and even the principal may not be repaid.

Shorter maturities
These bonds are typically issued with shorter maturities. They are also less likely to have call protection, which means that if a company’s financial condition or credit rating improves, the issuer can call its outstanding bonds and take advantage of lower funding rates.

Emerging companies
While many high yield bonds are issued by former investment grade companies in decline, the high yield market also provides financing opportunities for emerging companies seeking working capital for expansion or to fund acquisitions.

Investing in high yield bonds at Fidelity

You may search for and purchase high yield bonds at Fidelity.com, where you can choose the credit rating levels appropriate for your portfolio and risk tolerance. You can also research recent ratings actions before you buy, and evaluate the liquidity risk based on real-time Trade Reporting and Compliance Engine (TRACE)2 data.

Once you have made your purchase, we encourage you to sign up for Fidelity’s fixed income alerts to receive email notifications in the event one of your bond holdings is downgraded or placed on negative credit watch.

Next steps

Find high yield bonds. Choose from 40,000 new issue and secondary market bonds & CDs, and approximately 60,000 total offerings with our Depth of Book.

Learn about fixed income alerts. Get updates on secondary corporate bonds sent to your wireless device or Fidelity.com inbox.

Sign up for alerts.
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interest

the amount paid by a borrower to a creditor, or bondholder, as compensation for the use of borrowed money

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maturity, maturity date(s)

the date on which the principal amount of a fixed income security is scheduled to become due and payable, typically along with any final coupon payment. It is also a list of the maturity dates on which individual bonds issued as part of a new issue municipal bond offering will mature

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debt obligation/principal

an interest-bearing promise, to pay a specified sum of money (the principal amount) on a specific date; bonds are a form of debt obligation; categories of bonds are: corporate, municipal, treasury, agency/GSE

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issuer

a government, corporation, municipality, or agency that has issued a security (e.g., a bond) in order to raise capital or to repay other debt; the issuer goes to an underwriter to get their securities sold in the new issue market; for certificates of deposit (CDs), this is the bank that has issued the CD; in the case of fixed income securities, the issuer of the security is the primary determinant of the security's characteristics (e.g., coupon interest rate, maturity, call features, etc.)

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yield

the percentage of return an investor receives based on the amount invested or on the current market value of holdings; it is expressed as an annual percentage rate; yield stated is the yield to worst — the yield if the worst possible bond repayment takes place, reflecting the lower of the yield to maturity or the yield to call based on the previous close

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maturity, maturity date(s)

the date on which the principal amount of a fixed income security is scheduled to become due and payable, typically along with any final coupon payment. It is also a list of the maturity dates on which individual bonds issued as part of a new issue municipal bond offering will mature

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call protection

provision of a bond that makes it non‐callable or not subject to a scheduled call, even though other early redemption provisions may exist as specified in the prospectus or official statement

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Treasury inflation-protected securities (TRACE)

the Trade Reporting and Compliance Engine (TRACE) is the FINRA developed vehicle that facilitates the mandatory reporting of over the counter secondary market transactions in eligible fixed income securities

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downgrade

a reduction in the rating awarded a debt or equity security; a credit agency downgrades the debt of a company, municipality, or governmental entity indicating a potential deterioration in the financial situation of the issuer and its ability to meet its obligations in full and/or on time.; a downgrade suggests investors are less certain to receive interest payments and return of capital

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coupon

the interest rate a bond's issuer promises to pay to the bondholder until maturity, or other redemption event; generally expressed as an annual percentage of the bond's face value

Questions?

Fidelity Learning Center

1. “Average Cumulative Issuer-Weighted Global Default Rates, 1970-2009,” Moody’s Investors Service, February 2010
2. Real-time and historical trade information provided by the Financial Industry Regulatory Authority (FINRA) Trade Reporting and Compliance Engine (TRACE) for corporate bonds.
In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk and credit and default risks for both issuers and counterparties.
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