The level of defaults on corporate-issued bonds has risen above recession levels in recent months. However, in spite of the massive risk associated with such investments, buying has continued unabated. Buyers may be moving towards Bitcoin as a safer, alternative investment.

Such frenzied buying indicates that investors are willing to take high-risk positions for rewards. This is often a sure sign of a recession-ready economy. [CNBC]

The default rate increase has been marked. Junk bond default rates in 2019 rose to 3.3%, far above the 2.4% expected without a recession. Energy bond defaults surged to 9.5%—a substantial jump above the 4.4% expected during times of economic stability.

These default rates, while concerning enough, do not even account for the dramatic amount of refinancing that is keeping company debt afloat. Refinancing has reached record numbers among junk bond issuances. Lenders are willing to lend, and companies are turning over debt rapidly.

This refinance wave has kept many of the defaults at bay. However, when liquidity dries, these refinance options are sure to turn sour, leaving bonds to default en masse.

However, the fact that these extremely high-risk bonds are selling could speak volumes about the market. Also, a massive $50 billion in new issuances released in January, a staggering number, given the $160 billion total from 2019.

The market’s buying pressure and substantial liquidity has led to this type of supply wave. In spite of the high-risk nature of these products, it appears that investors are willing to go in on anything with a guaranteed return—even junk.

This lends some concern to Bitcoin investors. While the original cryptocurrency has jumped above $10,000 in recent trading, much could be related to the hype in the market. With liquidity at such high rates, buyers may be moving toward Bitcoin as another avenue of potential return, regardless of risk.

Bitcoin’s volatility has made it something of a concern for investors. However, when money is flowing, it seems that any asset can find supporters. Whether this is related to fear in other sectors, or hopes for returns remains to be seen.