Every bond asks the same question: will the borrower pay? For a gilt, the borrower is a government that issues its own currency, so the risk of not being paid in pounds is treated as very low. A corporate bond depends on one company's finances, and pays a higher yield for that extra risk. A credit rating grades the risk: bonds rated BBB− or above are investment grade.
Below that line are high-yield bonds, issued by weaker companies that have to pay more to borrow. The higher yield is compensation for a real chance of not being paid in full. In a downturn, high-yield bonds tend to fall alongside shares, just when a bond was supposed to hold steady, and when a borrower defaults, bondholders often get back only part of what they lent.
The extra yield is the market's price for the chance of not being paid back.
Educational content only. It is not personal financial advice.