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Indeed. Category #4 "high yield corporate bonds" are also known as "Junk bonds" because they kind of suck at the stable cashflow part, since they tend to go to
by zie 4mo ago
Indeed. Category #4 "high yield corporate bonds" are also known as "Junk bonds" because they kind of suck at the stable cashflow part, since they tend to go to $0 sometimes, much like stocks.
Technically when bonds "go to $0", you actually get priority over any corporate assets vs stock ownership, but if the bond went to $0, there is likely not a lot of assets left either. So you can't expect to get saved completely from whatever asset sale happens.
- throwaway2037 4mo agoCredit events (late payments, bankruptcy, etc.) for junk bonds are much less rare than people think. If there is bankruptcy, usually it is Chapter 11 which allows for re-org. > Technically when bonds "go to $0" Extremely unlikely, unless there is massive accounting fraud. Recovery rates are on average about 45-55% (since 1987 according to research by S&P).
- zie 4mo ago> Recovery rates are on average about 45-55% (since 1987 according to research by S&P). Exactly.