CIF - Will Fallen Angels Disrupt U.S. Credit Markets?
By Matthew Minnetian, Susan Hutman, Gershon Distenfeld
The media and some market observers are bracing for a blizzard of BBB-rated bonds to get downgraded to junk as the credit cycle turns. We expect it will be closer to a flurry.
Investors are right to be concerned, of course. US corporate debt surged when interest rates were low. And companies at the bottom of the investment-grade credit ladder were among the biggest borrowers.
BBB bonds accounted for nearly half the US investment-grade index when 2018 began, from about 33% in late 2008. Excluding financial issuers (whom