fallen angel

Definition

A bond that once held investment-grade status but has been downgraded to junk status, usually due to deteriorating business conditions. Pride comes before a fall, and so does credit rating.

Example Usage

When the retailer's debt was downgraded to BB+, the fallen angel bonds sold off sharply as investment-grade funds were forced to dump them.

Origin

Financial markets slang adapted from the religious concept of angels cast down from heaven.

Fun Fact

Fallen angels often see sharp price drops not from fundamentals alone but because many funds are prohibited from holding non-investment-grade debt.

Source: Credit markets terminology

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