Which type of bonds are classified as "non-investment grade" or "high-yield"?

Bonds classified as "non-investment grade" or "high-yield" are typically those that carry higher risk due to the issuer's financial condition, which corresponds to a lower credit rating. A BB rating reflects a greater likelihood of default compared to higher-rated bonds. Investors often receive higher returns for bearing this additional risk; therefore, these high-yield or non-investment grade bonds can be attractive to those looking for potentially lucrative, albeit riskier, investment opportunities.

In contrast, AA and AAA rated bonds are considered investment-grade securities, meaning they are generally lower-risk and deemed more likely to meet their payment obligations. Investment-grade bonds are rated from AAA to BBB- by most major rating agencies and are not classified as high-yield. This distinction is crucial for understanding risk and return in the fixed-income market, as it impacts an investor's strategy based on their risk tolerance and investment goals.