(Dow Jones) Junk bonds closed out a record-setting August Tuesday and look poised to resume their bull run in September, despite-and because of-persistently weak returns and outlooks for other asset classes.

August saw $23.0 billion in high yield bond issuance, according to data provider Dealogic, the seventh largest monthly volume on record. The performance was remarkable because August has historically been a relatively quiet month, and because no junk bonds priced during August's final 10 days.

After holding firm in July and early August, corporate bonds faded late in the month, losing some value in thin secondary market trade. A market respite is normal during peak late-summer vacation season, but this one also coincided with the worst August for equity markets since 2001.

Now, junk bonds, which often move in tandem with stocks, are tasked with regaining their momentum in September, historically the worst month of the year for equities, and October, the second worst.

Still, credit markets should ramp up pretty quickly after Labor Day. The twin engines driving high yield issuance during this time of low interest rates have been companies issuing new, longer-dated bonds to pay off old bonds or loans, and investors scouring markets for any kind of returns they can find.

Neither of those drivers shows any sign of a slowdown. Companies face a looming wall of maturities that will need to be refinanced over the next four years, while high yield funds have recorded $4.5 billion of net inflows since mid-July, according to Lipper FMI.

Despite how far junk bonds have come--returning 57% in 2009 and 8.3% in 2010 to date, according to Merrill Lynch--investors still see the potential for further gains.

"Considering the continued improvement in corporate balance sheets and how much demand there's been for high yield, there's still a lot of value in the high yield market," said Gibson Smith, fixed-income portfolio manager at Janus Capital Group.

Fund managers such as Smith cite current average high-yield risk premiums of 6.9 percentage points above Treasurys, more than a full percentage point higher than historical norms, and say that could shrink further without getting out of line with default expectations, even while underlying Treasury rates bounce along near historic lows.

The economy keeps struggling, but fixed-income market participants point out that their asset class is less reliant on growth than equities in order to produce solid returns.

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