What is the main appeal of junk bonds to investors despite their high risk?

The main appeal of junk bonds to investors lies in their high yields. Junk bonds, or non-investment grade bonds, typically offer significantly higher interest rates compared to higher-rated bonds. This higher yield compensates investors for the increased risk of default associated with issuers that have lower credit ratings. The potential for greater returns attracts investors who are willing to take on more risk in exchange for the possibility of higher income.

While there may be other benefits associated with different types of bonds—like government backing, tax benefits, or guaranteed returns—junk bonds specifically draw interest primarily because of the higher yields that can be earned, which makes them particularly attractive to those seeking to maximize their investment returns.