What Happens To Junk Bonds In Recession?

What Happens To Junk Bonds In Recession?

1 Answer

  1. Although Junk bonds are not affected by the rise or fall in interest rate as much as regular bonds but recession can create a negative impact on them. Junk bonds strength is connected to the company’s strength and recession is no good for any company, in this sense when interest rates fall, junk bonds might also fall in value because the companies issuing them earn less and are unable to pay off their debts. A rise in company revenues is more important to the health of a junk bond than interest rates are. A strong economy means fewer defaults and more junk bonds that are successful.
    A junk bond is affected by the changes in company and so would be affected by recession, the value of junk bond would thereby rely on the fact that how the company’s performance and changing economic conditions impact the risk of default.

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