A fallen angel is a bond that was rated investment-grade (credit rating is BBB- or higher by Standard & Poor’s or Baa3 or higher by Moody’s) but has since been downgraded to junk status due to the declining financial position of its issuer. A bond downgrade may occur when the bond issuer experiences declining revenues or other financial problems. The chances of a bond being downgraded increases when a company’s debt levels are rising while the revenues are dropping.

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