The origin of junk bonds

Junk bonds refer to corporate bonds that may not be repaid according to the evaluation results of Moody's and Standard & Poor's in bond rating agencies. "Garbage" is an arbitrary but very important feature. The credit rating of bonds is developed in a long sequence. The high-quality bonds of IBM are at one end, and the high-quality bonds of a cotton trading company in Beirut are at the other end. There must be a breakpoint somewhere. From this breakpoint, a company's bonds have changed from investment objects to pure gambling.

Junk bonds originated in the United States and existed in the 1920s and 1930s. Before 1970s, junk bonds were mainly issued by some small companies to raise funds for business development. Because the credit of this bond is doubted, there are few buyers. In the early 1970s, its popularity was less than $2 billion. Since the end of 1970s, junk bonds have gradually become the investment tools sought after by investors. In the mid-1980s, the junk bond market expanded rapidly and reached its peak. Throughout the 1980s, American companies issued more than17 billion dollars of junk bonds, among which Dechong Securities Company, known as the "king of junk bonds", issued 80 billion dollars, accounting for 47%. 1988 The total market value of junk bonds is as high as $200 billion. 1983, Dechong Securities earned more than 10 billion dollars, but in 1987, it became the most profitable company on Wall Street, earning more than 4 billion dollars, and was known as the "God of junk bonds" and "magician".