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.
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.
Related Fool Articles
Recent Mentions on Fool.com
- 1 Stock Wall Street Is Wrong About
- Walt Disney Co. Stock: The Market Delivers an Enticing Discount
- One Wall Street Pro Warms Up to Disney
- Does Natural Gas Transportation Have What It Takes to Thrive?
- LinkedIn Is Not Destined to Become Twitter
- Is China's Volatile Economy Trouble for Walt Disney Co.'s New Megaresort There?