Rising Rates Put off Borrowers, U.S. Junk Bond Market Shrinks

The $1,350 billion U.S. junk-bond market has lost nearly $200 billion since hitting an all-time high in late 2021, helping to keep prices at levels investors say could send the wrong signal about America’s health, according to the Financial Times. level.
A sharp rise in interest rates since early last year has discouraged companies from issuing new debt, while some have shifted from the high-yield market to investment-grade territory.
At the same time, a growing number of borrowers are looking to private markets for new funding.
Overall, this resulted in a 13% reduction in total U.S. junk bond issuance.
That shrinkage has left investors with fewer options when it comes to buying bonds and has prompted some fund managers to buy bonds they might not have otherwise chosen.
That has helped support junk bond prices, even as many market participants still expect some form of economic slowdown.