Brady Bonds

  

Categories: Bonds, Muni Bonds

These are bonds issued by the governments of developing countries. Countries issue them to reduce their country's debt. The bonds were named after Nicholas Brady, the treasury secretary in the '80s who used them to try and help Latin American countries that had lots of debt. These babies were denominated in U.S. dollars and backed by the U.S. Treasury, which made them pretty attractive to investors.

And no, a mutual fund holding only Brady bonds is not called a "Brady Bunch." Nice try, though, Chuckles.

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Finance: What are High Yield/Junk Bonds?19 Views

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finance a la shmoop. what are high-yield or junk bonds? alright well here are low

00:08

yield bonds, you know Apple Microsoft you know, safe secure sleep [charts]

00:12

like a baby even for Chicken Little those kind of bonds. the sky is not

00:17

falling. all right well here are high-yield bonds Sears you know Toys R

00:20

Us aren't they bankrupt already best buy well someday bankrupt ,yeah not safe not

00:25

secure, the sky among other things like credit ratings is in fact falling. well [definitions on screen]

00:32

why do high-yield bonds yield a lot that is they pay a lot of interest to

00:36

investors why do they do that answer because they have to. right but

00:40

why why do they have to? well because the bonds are risky either the business is

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in danger of dying, or the business has borrowed so much money that it's in [ best buy pictured]

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danger of not being able to pay back the loans. that is their operating profit is

00:54

just barely enough to pay the interest costs on all the loans they've borrowed

00:59

so the risk of default is high and investors demand very high interest for

01:04

taking on the risk of having to go through a potential bankruptcy. the term

01:08

junk was coined in the 1980s when the now-defunct investment bank Drexel [100 dollar bill]

01:13

Burnham Lambert sold boatloads of bonds which had dubious creditworthiness in

01:17

weak backing and so the boatloads of bonds sank and ended up as basically

01:23

junk. and not the Chinese junk that actually sales, a different kind of junk.

01:27

anyway unlike your fancy triple-a bonds which you can see here on this lovely [ boat sails on a lake]

01:31

table ,those junk bonds were riskier than us women in shark-infested waters with a

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bloody nose. so what's the best way to encourage people to do risky possibly

01:40

dangerous things ?well pay them a lot of money. so that's why junk bonds yield

01:45

such killer returns for investors because otherwise well these things [two people frown in front of bond store]

01:49

would never leave the shelf.

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