High Default Risk – Issuers of junk bonds have lower credit ratings, increasing the likelihood of default

Market Volatility – Junk bond prices can be highly sensitive to economic downturns and market changes

Liquidity Concerns – Finding buyers for junk bonds during market stress can be challenging

Lower Recovery Rates – In case of default, recovery rates for junk bonds are typically lower than for investment-grade bonds.

Interest Rate Sensitivity – Rising interest rates can negatively impact junk bond prices, reducing returns.

Economic Dependence – Junk bonds are more vulnerable to economic slowdowns, impacting their performance