Junk Bonds Stage a Comeback as Investors Regain Risk Appetite

As the Federal Reserve raised interest rates, trying to cool the economy by increasing borrowing costs, companies that are considered risky have found it harder to raise debt. But firms with low credit ratings, whose debt is often referred to as “junk,” are now taking advantage of a window of opportunity to borrow more cash.

Junk-rated companies, which tend to pay higher rates, have sold $4.1 billion in bonds in the United States this week, according to Refinitiv. Already, issuance of junk bonds has reached the highest weekly amount since early June, just before investor confidence cratered, the stock market reached its nadir and lenders backed away from junk bonds, which are also known as high-yield debt.

A batch of better-than-expected corporate earnings reports and positive economic data has recently lifted stock markets, eased volatility and softened some investors’ forecasts for the Fed’s rate-raising campaign. The junk bond market has also begun to thaw: This week’s issuance topped the total for all of July.

Article source: https://www.nytimes.com/2022/08/19/business/junk-bonds.html