A Collateralized Bond Obligation (CBO) is an investment-grade bond backed by a pool of variously rated bonds, including junk bonds. CBOs represent different degrees of credit quality rather than different maturities.
Investment-Grade describes bonds suitable for purchase by prudent investors. Standard & Poor's (S&P) designates the bonds in its four top categories (AAA down to BBB) as investment-grade.
A junk bond is a high-yield, high-risk security typically issued by companies seeking to raise capital quickly. These bonds offer higher interest rates to compensate for the increased risk of default.
