High yield debt is a loan or bond which pays a high interest coupon to reward the investor for increased levels of risk. While there is no formal definition of high yield, it generally means the issuer or instrument is rated sub investment grade. This means that from a credit rating perspective, that the issuer or instrument is rated below triple B minus by S&P and Fitch, or B double A three by Moody's. It is important to understand that not all high yield or sub investment grade debt has a public rating. Many issuers pursue financing such as bank loans, for example, because they do not require a public rating. Much of the reason for the growth in private credit is to avoid the rating agency process. Just because an issuer or instrument does not have a public credit rating does not mean that the lenders are not assessing the risk in the same manner. The reason why the demarcation between investment grade and sub investment grade is so important is because the risk of default escalates much more once we cross the threshold of investment grade to sub investment grade. If we look at the yield curves, we can see the bond yields for the bonds rated from double A to triple B. These are the lower three lines in the graph. At the top are the yields for a double B sub IG bond, while all the curves follow the same market trends. Notice how much higher above the investment grade yields the double B bond curve is. There is a significant increase in the yield for a double B bond over a triple B bond, which is simply not present for accepting triple B risk over a rated risk, high yield debt is indeed high risk debt.