What's going on?

The world�s riskiest companies have been selling �junk bonds� in their droves this year, and investors have had one heck of an appetite for them.

What does this mean?

The Federal Reserve has been pouring money into the US economy to keep it ticking over, which has pushed the country�s interest rates to ultra-low levels. That�s allowed and encouraged risky companies � ones with a higher likelihood of failing to repay their loans � to sell investors so-called �junk bonds� at rates usually set out for only the safest companies.

And investors � potentially fed up of making such low returns on relatively safe bonds � seem to have been more than happy to buy them. Not just any old junk bonds, either: the riskiest of them, which this year have made up the biggest share of all junk bonds sold since 2007.

Why should I care?

For markets: This is essentially a bet on the economy.

Some investors are feeling uneasy about the quality of bonds that have been hitting the market: a lot of these companies, after all, still have a high chance of bankruptcy. Others seem to have more confidence that a successful vaccine rollout will work wonders: they�re essentially betting an economic rebound should see company profits � and, in turn, companies� abilities to repay investors � rise.

The bigger picture: Junk bond investors might be onto something.

It�s easy to understand why some investors might be tempted. See, credit rating agencies � which regularly assess companies� abilities to repay their debts � drop bonds to a lower rating if they look like they�re getting riskier. But in the long term, those that have only just been downgraded actually tend to outperform the ones�already classified as risky. That might be why investors piled a record amount of money in January into an exchange-traded fund that tracks these �fallen angel� bonds.