The sales of high-risk corporate bonds worldwide, known as “junk bonds”, set a new record this month because of record low interest rates and the large amount of money in circulation. This, together with better prospects for the global economy, encourages investment, even in companies with low credit rating. Companies worldwide have issued bonds for risk 38.3 billion dollars in March, more than the previous record of November 2006, where such securities are issued for 36 billion dollars. Risk premium on these “junk bonds” have since declined by 0.95 percentage points to 5.96 percent. This shows the difference between their yield and that of U.S. government bonds. According Index Bank of America Merrill Lynch, which monitors the risk premium on these bonds is the smallest spread since the beginning of 2008, which indicates that the situation on financial markets worldwide has normalized. Over the past quarter investors have invested 33.6 billion dollars in funds that invest in risky securities, a study of EPFR Global. The trend in March is radically different from what happened in February, when many companies were forced to postpone planned bond issues because of the high risk premiums. Fiscal crisis in Greece led many investors to retreat from risky assets due to concerns of re-rolling of the global economy and the freezing of financial markets this year.
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