Industry fears market turbulence will lead to surge in 'fallen angels'

Covid-19 and oil price plunge spook investors

Beth Brearley
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Managers argue the trend of high-yield downgrades could exceed the volume of 'fallen angels' seen in 2008
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Managers argue the trend of high-yield downgrades could exceed the volume of 'fallen angels' seen in 2008

Concerns surrounding an increase in 'fallen angels' have ramped up amid the recent market turbulence, according to fixed income investors, who warn that debt at the lower end of the investment-grade spectrum is most vulnerable to being downgraded and relegated to the high-yield market.

The combination of the Covid-19 crisis and plummeting oil prices have rattled markets and are driving the global economy towards a recession. While the US Federal Reserve's unprecedented move last month to buy corporate bonds has been well received, it is not seen as being sufficient to prevent widescale downgrades. Into the void: Recession will be 'deepest peak-to-trough decline in recent memory', experts warn Sean Markowicz, strategist, research and analytics at Schroders, has estimated between $277bn to $561bn of BBB debt could be downgraded, with losses at the investment grade ...

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