Junk Bonds On The Up

A 'junk' bond is a bond issued by a company that is considered to be a higher credit risk. The credit rating of a junk bond is considered 'speculative' grade or below 'investment' grade. The higher the credit risk means that junk bond yields are highers then bonds of better credit quality. And so, too, is the risk of default.

Merrill Lynch released figures Tuesday indicating that the worst may be over for the market. In February 54.3% of outstanding European high-yield bonds were trading at least 1,000 basis points over government bonds, the usual definition of junk status. This figure is down from the peak figure of 62.6% seen in October 2001.

Merrills caution that defaults may remain high, however, until around June.