When credit locks up,
junk bond prices fall rapidly, and you see more defaults.
Not exact matches
It's hard to argue that the modest
fall in
junk bond prices suggests that a larger correction is imminent.
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The energy and materials sectors of the
bond markets have been a real drag on performance on the
junk bond markets as
bond prices have
fallen.
For example, an oil company that has reported sustained losses over several quarters due to
falling oil
prices may see its investment - grade
bonds downgraded to
junk status due to increasing risk of default.
Opportunistic investors moved into
junk bonds in late 2008 when, in the face of frozen credit, yields on
junk bonds went up to more than 20 % on the back of
falling prices and to richly compensate investors for taking up the risk.