Think about bone-crushing recession, bank failures, U.S. troops involved in a major Middle East conflict. Now you know how a bond trader looks at the world. Right now, bond traders are worried about everything short of an invasion by Venusian brain garglers. And if they're wrong, high-yield junk bonds could have a huge rally. So this could be a good time to buy junk.
Junk bonds are long-term IOUs issued by companies with low credit ratings.
Companies with poor credit ratings, like individuals, have to pay higher interest rates than those with good ratings. So junk bonds pay pretty juicy interest. For example, the U.S. Treasury has the world's best credit rating. It's no wonder that junk funds have more assets than any other kind of bond fund. But those high yields come with high risks.