The bond market is getting riskier with investors now piling up for junk bonds again. The Financial Times reports that demand is so high now that it's pushed the average price on such corporate debt to its highest level since June 2007 before the markets imploded, kicking off the global financial crisis. BNP Paribas has told the FT that people are taking to junk bonds because they offer better yields than stocks and in any case, no one trusts the stock market any more.
This is a very bad sign. As The Wall Street Journal notes, companies are now selling bonds with fewer protections for investors, which means sooner than later, people are going to get burned. It will lead to a bubble and things will get ugly.
The danger is that the market is re-creating the same conditions that led to the financial collapse that started in late 2007. People are greedy for yield, and no one stops to think. History is repeating itself.
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