QUICK DEFINITION
Credit Risk is the risk that a borrower fails to make promised interest or principal payments in full and on time.
WHY IT MATTERS
Why Credit Risk matters in bond markets
Credit risk is a primary reason non-government bonds usually offer yields above safer benchmarks.
MARKET CONTEXT
How to think about it
Bond investors use credit risk as part of a wider framework that links prices, yields, cash flows, liquidity and risk. The concept should therefore be read together with its related terms rather than as an isolated definition.
Is Credit Risk important for fixed-income investors?
← Back to the Bond Market Glossary Yes. Credit risk is a primary reason non-government bonds usually offer yields above safer benchmarks.