Just call me angel of the funding, angel...Yeah.
Just like angels are usually a welcome sight, an angel bond is one that has a medium or high rating. If the three big bond rating agencies (Moody’s, S&P, and Fitch) rate a bond BBB or Baa3 and higher, the bonds are considered low risk. However, they also provide a lower interest rate since the issuer has a high credit rating.
Most municipal bonds and all U.S. Treasury bonds are considered to be angel bonds. The agencies rate a bond when it is first issued. However, they may lower the rating over time if a municipality, for example, is experiencing economic challenges such as filing for bankruptcy (Detroit, 2013), or anything that increases the risk that they might not be able to pay back the principal.
If a bond was once an angel bond but then is downgraded to a “junk” rating, it is known as a fallen angel. Think of JC Penny and Toys Are Us and Sears and a whole slew of soon-to-be-lunch-for-Amazon companies.
Related or Semi-related Video
Finance: What is Fitch Investors Service...6 Views
Finance a la shmoop what is Fitch investors service? Google, Facebook, Amazon
the big three not least they are this week well for a much longer time Fitch
has been the third leg on the you know stool Moody's supports this leg standard [Fitch, Moody's and S&P shown on a stool]
and poors supports this leg and the big fat guy who sits right here yeah that's
you, you the big fat walletd bond investor who relies on the scores of
rating services in part like these to figure out how much risk premium you
should attach to the bonds you're buying or rather the interest rate rent you
should be charging the issuers for the privilege of renting your money
well distinctively for Fitch's rating service well it's owned mostly by Hurst
yes William Randolph flavored that Hurst you know rosebud [Man whispers rosebud]
yeah well that's William Randolph yeah first big swing and media mogul no other
kind of mogul you know if we lose a million dollars a year we'll have to
shut our doors you know a hundred years yeah that one all right well Fitch's is
a hundred-year-old global firm with feet in london and new york and well pretty
much everywhere people rent money in the form of bonds and after all that time [Fitch's locations appear across the map]
you'd think they could have come up with something a bit more creative than their
bond rating system right here this thing yeah
looks eerily similar to those of Moody's and Standard & Poor's hmm and well had
shmoop owned a bond rating service well we'd have had ratings like this [Shmoop ratings service appears]
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