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What is a “Junk Bond”?
A junk bond is, broadly, a bond with a non-negligible risk of default.  ("Bond" ought to be defined elsewhere, but broadly it's a financial instrument you buy from a company or government, where they promise to pay you back the principal and some interest over time, on a particular schedule.) The name "junk" is a bit exaggerated: many of them are issued by respectable and reasonably stable businesses. junk bonds were required to do large leveraged buyouts.  This means: the company issued fairly risky, fairly high-yield debt, to buy out equity holders.  They have to pay a high rate on the debt because the company's now fairly highly geared (ie has a lot of debt relative to its value) and it may have to pay out a large fraction of its earnings as interest. What is a junk bond and how does it differ from a regular bond?  It's only a matter of degree and nomenclature.  A bond that has a credit rating below a particular level (eg S&P BBB-) is called junk, or more politely "non-investment grade" or "speculative".  It's possible for an existing bond to be reclassified from one side to another, or for a single issuer to have different series some of which are more risky than others.  The higher the perceived risk, the more interest the bond must pay offer in order to attract lenders. Why is there higher risk/chance of default? Well, why would a company be considered at higher risk of failing to repay its debt?  Basically it comes down to doubt about the company's future earnings being sufficient to repay its debt, which could be for example: