High Yield Education Hub
Glossary
Explore the fundamentals of global high yield bonds and how they can add value to client portfolios.
Bond characteristics
High yield bonds
Are below investment grade, these are bonds that offer higher yields due to their lower credit ratings compared to investment-grade bonds. They carry higher risk but can provide higher returns potential.
Coupon rate
The annual interest rate paid by the bond issuer relative to the bond's face value. High yield bonds generally have higher coupon rates.
Maturity
The date on which the bond's principal is repaid to investors. High yield bonds can have varying maturities, affecting their risk and return profiles.
Covenants
Terms and conditions in bond agreements that protect the interests of bondholders. High yield bond covenants can be more stringent due to higher risk.
Duration
A measure of the bond's sensitivity to changes in interest rates, expressed in years. Longer duration bonds may be more volatile.
Risk metrics
Credit rating
This is a measure of a borrower’s ability to repay debt, indicating the chance of default. Bonds rated "BB+" or lower fall into the high yield category, offering potential for greater returns.
Default risk
The risk that a bond issuer will be unable to meet its financial obligations, leading to a default. High yield bonds have a higher default risk, compared to investment-grade bonds.
Interest rate risk
The risk that changes in interest rates will affect the bond's price. High yield bonds can be more sensitive to interest rate fluctuations.
Recovery rate
The amount recovered by creditors in the event of a default, expressed as a percentage of the bond's face value. High yield bonds typically have lower recovery rates.
Debt-to-equity ratio
A measure of a company's financial leverage, calculated by dividing its total liabilities by its shareholder equity. Companies issuing high yield bonds often have higher debt-to-equity ratios.
Market dynamics
Yield spread
This is the difference in interest rates between high yield bonds and traditionally safer government bonds, like US Treasury bonds. It reflects the additional risk and potential reward of investing in high yield bonds.
Liquidity
Refers to how easily an asset can be bought or sold in the market without affecting its price. High yield bonds may have lower liquidity compared to investment-grade bonds.
Secondary market
The market where investors buy and sell securities they already own. High yield bonds are traded in secondary markets, which can impact their liquidity.
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Performance and analysis
Yield to maturity (YTM)
The total return anticipated on a bond if it is held until it matures. YTM for high yield bonds is generally higher than for investment-grade bonds.
Risk/return ratio
The relationship between the risk of an investment and the expected return from that investment. A higher risk/return ratio indicates that an investment offers higher potential returns for the level of risk taken, whereas a lower ratio suggests lower potential returns for the same level of risk.
Sharpe ratio
Is a measure used in finance to evaluate the risk-adjusted return of an investment portfolio or individual asset. It helps investors understand how much excess return they are receiving for the extra volatility or risk they are taking on compared to a risk-free asset. A higher Sharpe Ratio indicates that the investment has a better risk-adjusted return, meaning it provides more return per unit of risk. Conversely, a lower Sharpe Ratio suggests less attractive risk-adjusted returns.
Upside capture ratio
This measures the performance of an investment during periods when the benchmark index is rising. An upside capture ratio greater than 100% indicates that the investment has outperformed the benchmark during upward market movements. For example, if the benchmark index gains 10% and the investment gains 12%, the upside capture ratio would be 120%.
Downside capture ratio
This measures the performance of an investment during periods when the benchmark index is declining. A downside capture ratio less than 100% indicates that the investment has lost less than the benchmark during downward market movements. For example, if the benchmark index loses 10% and the investment loses 8%, the downside capture ratio would be 80%.
Special terms
Fallen angels
This term refers to bonds that were originally issued with investment-grade ratings but have been downgraded to below investment grade, becoming a high yield bond. The downgrade typically occurs due to a deterioration in the issuer's financial health or outlook.
Rising stars
This term refers to bonds that were initially issued as high yield bonds but have been upgraded to investment grade status due to improvements in the issuer’s financial health or creditworthiness.
T. Rowe Price Global High Income Fund
Exciting companies. Compelling income.
Current Yield
7.08% p.a.*
*As of 30 September 2025. Past performance is not a guarantee or a reliable indicator of future results. The current yield of the fund reflects the market-weighted average of coupon divided by price per security.
202508-4771180