Subordinated debt

Subordinated debt (also called junior debt) is debt that takes a lower priority than other debt.

Debt that takes higher priority is called senior debt.

If an issuer is liquidated then subordinated debt holders will only be paid after senior debt has been fully paid.

This makes junior debt much more risky and this is reflected in its price. It should have a higher yield (in many cases a significantly higher yield) than senior debt from the same issuer.

Subordinated debt may, but need not, be publicly traded bonds.