High yield refers to investments that offer a relatively high return compared to average market rates. The term is most commonly used for bonds that pay higher interest because they carry greater risk. These bonds are often issued by companies with lower credit ratings.

High yield usually means higher potential return, but also higher risk.

High yield bonds, sometimes called non investment grade bonds, compensate investors for the increased possibility that the issuer may struggle to meet its debt obligations. Because the issuing company may have higher debt levels, weaker financial stability, or operate in a more volatile industry, investors demand a higher interest rate.

The price of high yield bonds can fluctuate significantly depending on economic conditions. During strong economic periods, investors may be more willing to take risk, supporting high yield prices. In economic downturns, concerns about default risk can cause prices to fall sharply. High yield investments can enhance portfolio returns, but they require careful risk assessment.

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