Angel Bond

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.