Who’s to Blame for Fallen Angels and Sinking Demons?
If you’re worried about companies losing their investment-grade status, consider those getting cut within the depths of junk.
A hellish combination.
Photographer: Eric VANDEVILLE/Gamma-Rapho via Getty Images
The coronavirus age demands action. So the Big Three credit ratings agencies are downgrading borrowers with a hammer, moving at the fastest pace on record. Some market observers are already pointing fingers, saying ratings were too high to begin with. But who’s really to blame for all this?
Investors don’t like abrupt, large-scale downgrades. Slashing companies’ ratings from investment grade to junk — so-called fallen angels — or to more distressed levels, will spark massive selling pressure in the money management world. Bond funds often have mandates dictating whether and how much they can invest in high-yield issues.