In the last six months, investors have become more comfortable with the bonds' risk and structure, said Daniel Keating, senior managing director for municipal bonds at Bear , Stearns
Regulators encouraged banks to buy more by deeming the bonds risk-free, based on the assumption that no sovereign nation in the euro zone would ever default.
The bond issuers would also be required to keep a chunk of the securities in their own portfolios so that they retain some of the bonds' risk, under the S.E.C.'s plan.
If Moody's joins its peers and downgrades Greece below A-, the country's bonds risk becoming ineligible for use as collateral by the European Central Bank when the ECB tightens its rules at the end of this year.
But with todays low interest rates, investors in bonds risk getting stuck with low-yielding paper.
Protect against bond risks by diversifying bond holdings.
"We are set up for risk bonds and risk assets to underperform," he said.
Generally, bond risk can be broken down into two categories: credit risk, which reflects a company's ability to pay its debts, and interest rate risk, which refers to the impact of rising interest rates on bond prices.
With the average junk bond risk premium now back to levels not seen since before Lehman Brothers' collapse, and investment-grade spreads cranking ever tighter, issuers could still be lured.
To Moshe A. Milevsky, the author of "Are You a Stock or a Bond?," risk should have less to do with the era in which you live and more to do with what you do for a living.
