LOADING
The risk that a borrower will be unable to make required payments on their debt obligations.
Default risk is the primary concern for bond investors and is reflected in credit ratings and yield spreads. U.S. Treasury bonds are considered to have virtually zero default risk, which is why they serve as the benchmark "risk-free" rate. Corporate bonds carry varying degrees of default risk depending on the company's financial health. High-yield bonds have historically had annual default rates of 3-5% on average, spiking to 10%+ during recessions. Investors are compensated for bearing default risk through higher yields, known as the credit spread.