Source: Bloomberg

According to The Wall Street Journal, risky bonds are making a comeback in Asia after falling out of favor over the summer, as recent developments in the U.S. have prompted investors to embrace increased risk in exchange for higher yields.

Buoyed by the U.S. Federal Reserve’s $85 billion-a-month bond-buying program, investors in Asia took advantage of high-yield, or “junk,” bond issues early this year to increase returns against an otherwise low-interest backdrop. In the first five months alone, new junk bonds issued in Asia outside of Japan totaled $22.4 billion, exceeding the $15.3 billion total for all of last year. But indications from the Fed in late May that it could dial back its stimulus spending earlier than expected damped enthusiasm for the risky securities.

The Fed didn’t announce a pullback in spending after policy meeting last month, however, leading investors to expect at least a brief reprieve.

“The market has returned to a more risk-on mode since early September,” said Job Campbell, Hong Kong-based senior portfolio manager at Income Partners Asset Management, a $1.4 billion fixed-income manager. The fund has recently bought high-yield bonds issued by Chinese property firms including Yuzhou Properties Co. and Greentown China Holdings Ltd. 3900.HK -1.15% , he said.

Investors who were cautiously dipping their toes back into higher-yield bonds after the mid-September decision may have gotten more bullish since the U.S. budget and debt-ceiling standoff this month, the resolution of which has provided more certainty that the Fed will continue its stimulus effort at least until early next year, when the next showdown could occur.

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