Chart No. 201
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Fallen angels: the bonds everyone sells too early.
When a bond drops from investment grade to junk, forced sellers dump it in a week. Patient buyers have been paid for that impatience for twenty years.
Nadia Brennan
Founder and editor
Illustrative data based on public sources.
Fallen angel index · IG
When a bond is cut from investment grade to high yield, many of its owners are forced to sell it within weeks. Insurers, pension funds and investment-grade index funds cannot keep it.
Paid for patience
Fallen angels have returned more than the high-yield index in fourteen of the last twenty years. Most of that comes from the months right after the downgrade, when forced sellers have already left and the price is too low for the risk.
How to own them
A dedicated fallen-angel index exists, and so do funds that track it. The simpler rule: don’t sell on the downgrade if you are not forced to, and buy from those who are.
Not investment advice. Carry writes about markets; it does not tell you what to buy or sell. Charts use illustrative data unless a source says otherwise.
