What is Foolsaurus?

It's a glossary of investing terms edited and maintained by our analysts, writers and YOU, our Foolish community.


A downgrade is the process of reducing the bond rating of a debt instrument. Bond rating agencies constantly monitor the credit status of issuers of debt instruments. If the financial condition of one deteriorates they issue a credit alert followed by a downgrade.

Expanded Definition

Because bond rating determines the market interest rate of a debt instrument, the downgrade causes the market value of the instrument to fall so buyers receive the new market yield. Hence, a downgrade is a significant event for a debt security and for its issuer.

Your broker will usually notify you if a bond in your portfolio is downgraded.

Related Fool Articles

Related Terms

Recent Mentions on Fool.com