With no end in sight for the Federal Reserve's fixation on low interest rates, a likely scramble for yield has intensified worries about dangers ahead for junk-bond investors.
The Fed's announcement on Wednesday that it will tie near-zero rates to specific unemployment and inflation rates sent a clear signal: Those looking for return in cash and fixed income won't get it from conventional debt instruments like Treasurys and money market funds.
Instead, they'll have to turn to assets like stocks, commodities and higher-yielding bond products that carry greater return - and greater risk. (Read More: Fed to Keep Easing, Sets Target for Rates)
"The market is thirsting for yield and the Fed is pushing people to do things like this," said Lawrence G. McDonald, who as head of LGM Group specializes in junk-bond trading. "So big asset managers are reaching, reaching, reaching and companies know this and are issuing, issuing, issuing all this crap."
The big losers could be not only junk bond issuers but also pension funds and retail investors as well.
Of course, the thirst for yield is nothing new, as the Federal Reserve has had its boot on the throat of the rate markets since the early days of the financial crisis in 2008.
However, the central bank Wednesday it will keep rates at zero at least until the unemployment rate, currently at 7.7 percent falls all the way to 6.5 percent, and the rate of inflation hits 2.5 percent. Fed Chairman Ben Bernanke said even reaching those targets is no guarantee the Fed will back off its zero interest rate policy, or ZIRP. (Read More: Game Changer? Jobs Report 'Isn't Much News at All')
Stock market traders actually reacted with some trepidation at the accompanying news that the Fed will buy $45 billion worth of Treasurys each month in a move that will mean a total of $85 billion in monthly asset purchases and a balance sheet expansion likely to go well past $4 trillion.