Bonds are classified into two main categories based on risk and the issuer's ability to repay: investment grade bonds and junk bonds (also called high-yield bonds). International credit rating agencies (S&P, Moody's, Fitch) make this classification.
Investment grade bonds carry low to moderate default risk and receive higher ratings (BBB- or above for S&P/Fitch, Baa3 or above for Moody's). They're typically issued by governments or large, financially strong companies. Their yields are relatively lower.
Junk bonds carry high default risk and receive lower ratings (BB+ or below). They're often issued by financially weaker or newer companies. Their yields are higher to compensate investors for the extra risk.
Bangladesh's bond market is still in early stages. Government treasury bonds are considered risk-free, but credit ratings are crucial for private sector bonds.