If a company issues junk bonds, it borrows money from investors, usually at a high rate of interest, in order to finance a particular deal, for example the setting up or the taking over of another company.
[business]
junk bond in British English
noun
finance
a security that offers a high yield but often involves a high risk of default
junk bond in American English
Informal
a high-yield, speculative bond1 (sense 10), often issued to finance the takeover of a corporation
Examples of 'junk bond' in a sentence
junk bond
The prices of more risky junk bonds are the highest they have been for a decade.
Times, Sunday Times (2013)
The average junk bond now yields 5.6%.
Times, Sunday Times (2013)
Most junk bonds have not defaulted, but that doesn't mean much since most junk bonds have not been around for very long.
Charles A. D'Ambrosio & Stewart D. Hodges & Richard Brealey & Stewart Myers Principles of Corporate Finance (1991)
Because of the higher risk of default, junk bonds can be dangerous to your wealth; you can lose your capital if a business fails.