A corporate bond repaid after the ordinary ones
If the issuer fails, a subordinated bond is repaid only after ordinary bonds are settled. Because recovery is less likely, the yield is set higher. Banks and insurers issue them to thicken their capital, and some carry terms letting the issuer suspend interest. Choosing on yield alone hides what the bond actually is.
Where a company's ordinary bond pays 1% a year, its subordinated bond might pay 2%.
For learning, not investment advice. Decisions are your own.
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