Thanks to the uncertainty surrounding President Donald Trump’s trade war over the last few weeks, we’ve seen investors pull their money out of stocks and sell off government bonds.

Meanwhile, the corporate bond market — where big firms turn to fund day-to-day operations or big projects — has gone quiet. There’s one niche in that corporate bond market that’s making investors especially nervous: high-yield corporate debt. You might've heard of it as junk bonds.

All kinds of companies issue bonds with high yields.

“High-yield companies can span utilities, consumer products,” said Randy Vogel with Wilmington Trust. “You can have high-yield technology, high-yield cable and media, industrial companies, manufacturing companies.”

Vogel said what these companies have in common is that they tend to carry large amounts of debt on their balance sheet. They’re also more likely to stick to a narrow line of business.

“They’re either more cyclical or just more vulnerable to any weakness in their business,” said Vogel.

That’s why when these companies borrow money, investors demand higher interest rates — because the companies might default if business or the economy takes a turn for the worse.

“It’s going to be a more difficult environment if economic growth is moving downward, or if you’re in an environment where there’s a higher probability of recession,” said Chuck Tomes with Manulife Investment Management.

Sound familiar?

In the last few weeks, investors have been nervous about risky assets, including stocks and corporate bonds — especially high-yield bonds.

Tomes said investors have been demanding to be paid even more interest.

“That’s the market pricing in a higher probability of default,” Tomes said.  

But remember: These companies were already paying high interest rates.

So if high yields get even higher, “it has the risk of becoming something of a vicious cycle,” said John Canavan at Oxford Economics.

“If you’re looking at a company that you think might have trouble paying back its debt in the future, asking or creating even higher yields for the debt that they have certainly is just going to worsen their financial situation,” said Canavan.

Canavan said companies have alternatives if they need to borrow money. They can borrow from banks or the private credit market — meaning private equity firms and other asset managers. But that’ll cost them.

“Even if they are able to move to private markets, that may allow them to borrow, but private markets are also going to demand notably higher yields,” said Canavan.

So many companies are deciding to just sit on their hands right now, said Kelly Shue at Yale University.

“What we’ve seen in recent days and weeks is that very few companies are issuing new bonds,” said Shue.

Thing is, many companies have to issue bonds to refinance the debt they already have. Shue said if companies wait too long, it might get even harder for them to borrow money, especially if there’s a recession.

“What I worry about happening is something similar to our past financial crisis in ‘08, which is [that] a lot of firms had trouble rolling over their debt, because the credit market had collapsed,” said Shue.

Shue said if companies really need to borrow money, paying today’s high yields might not be such a bad idea.