Inflows into junk bond mutual funds tell analysts a lot about how much of a risk investors are willing to take. So when the research firm AMG Data announced Friday that last week’s inflows into the funds were higher than they have been all year, it became apparent that the risk threshold is quite high.

Junk bond funds, one week after posting $361 in inflows, took in $602 million for the week ending Wednesday, signaling that declining default rates have led to much higher demand. In fact, among all types of bonds, Merrill Lynch data shows that junk bond returns of 8.72% are higher than any other bond category.

"This [inflow] suggests a fair willingness to assume credit risk," said Christopher Garman, a junk bond strategy guru at Merrill Lynch, in an interview with Reuters.

The $602 million in inflows represented junk bond funds’ best week since the week that ended Oct. 15, 2003.

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