Investors from Vanguard Group Inc. to JPMorgan Chase & Co. are shunning bonds from the neediest borrowers as a slowing economy sends the default rate for companies that ratings firms deem to be in "poor standing" to the highest level since 2009.

Vanguard's $18.4 billion fund that buys junk bonds is "incrementally taking down risk on a credit-by-credit basis," said Dan Newhall, principal at the biggest U.S. mutual-fund firm. J.P. Morgan Asset Management has been reducing debt from companies more affected by lower consumer spending and has "dramatically" decreased holdings of securities ranked CCC since 2009, said Bill Morgan, a high-yield fund manager.

Waning demand signals turbulence in the $173 billion bottom tier of the junk market, where Standard & Poor's says the default rate of borrowers from Energy Future Holdings Corp. to Caesars Entertainment Corp. reached 27.2 percent in August, up 10 percentage points from a year earlier. Returns are slowing even as prices hover at about 14-month highs, Bank of America Merrill Lynch index data show.