Another factor leading corporations to issue more bonds is the sagging stock market. Companies can't raise capital by issuing equity because of depressed stock prices. To issue equities is not as viable. While lower interest rates create an attractive market to issue bonds, low rates aren't necessarily a big draw for investors. The instability on Wall Street has led to hard-hit investors looking for a safer places to invest their money.
Bonds are an obvious alternative.
During the long bull market, when some stocks were providing 20 percent or more in returns, the bond market was all but forgotten. But individual investors are not flocking to corporate bonds as a way of balancing out their portfolios. Institutional investors still dominate the corporate bond market, says Green. Individual investors, however, are making their presence felt in the bond market primarily through mutual funds, Green says. The trends in the mutual fund market are typical of a period of prolonged stock price declines, the institute reports.