Last month, I did a blog entry looking at the return of junk bonds, those dreaded financial instruments of the 1980s. They now offer better yields than shares.
Now, the New York Times reports tat the junk bond market is back with a vengeance, bigger than ever before. The worrying part is that these are companies are with less than desirable credit rushing in to sell bonds and take advantage of low interest rates. According to the Times, a record-breaking $275 billion of junk bonds was issued worldwide in the first nine months this year, up from $163 billion during the period last year. The Wall Street Journal reports that junk bond sales have hit their highest level in three years, before the financial crisis.
This is a real worry because it means investors are turning to riskier securities in their hope to snap a bigger yield. It increases the possibility of investors losing their shirts.
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