Question

Why are junk bonds more popular during a bear market?

Answer 1

Junk bonds are more popular in a bear market because they are cheaper to buy at that time. During a bear market, junk bonds go down in price just like stocks do. The big difference is that junk bonds pay a higher rate of interest than dividend paying stocks.

Answer 2

They are popular because they are a high risk high return type of a bond. A bear market is when the economy stagnates or is going down. A lot of bonds become junk bonds and people want to buy them since one of two things will happen. Either the company that provides them will fail miserably, so the high risk comes from there, or it will survive the economic problems and come out with high amounts of money for the investors, which is the high reward part.