If a company or government with excellent creditworthiness issues a bond, that bond is known as an angel bond in investment jargon. Angel bonds are the most secure class of bonds to invest in because they have the highest chances of delivering promised yields over the full bond term and repayment of the bond principal when they mature.
When a government’s or company’s creditworthiness is downgraded from excellent to good, fair or poor, its previously issued bonds are referred to as fallen angels. Bonds which a previously top-rated company or government issues after its creditworthiness is downgraded are not considered fallen angels because they never were angel bonds.
Fallen angels typically offer higher yields than highly-rated bonds because the risk of default is higher. Only if the issuer’s credit rating falls to fair or poor are its bonds classified as junk bonds.
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