Sometimes, it pays to dabble in something that's just a littlebad in the bond market.

Companies that were once investment-grade rated and have sinceplunged into junk territory are offering some of the best returnsin U.S. credit markets. So-called fallen angel securities havegained about 8 percent in the past 12 months, and 3 percent in 2015alone, according to Bank of America Merrill Lynch index data.

The securities beat the overall U.S. corporate-bond market by2.4 percentage points in the last year. When broken out by ratings,fallen angels bested both investment-grade and high-yieldnotes.

Investors in search of a way to juice returns should payattention: Barclays Plc analysts expect about $30 billion of bondsto join these ranks within the next 18 months. A growing number ofenergy companies are struggling to maintain their top grades aftercrude values declined 50 percent.

“Historically, the best buying opportunity for fallen angels hasbeen at the time of downgrade and immediately thereafter, asinvestors reallocate risk and prices fall,” Wells Fargo & Co.analysts wrote in a Feb. 17 report.

Barclays named Transocean Ltd. as having “a high likelihood ofbeing downgraded after its earnings report on Wednesday unless itpresents plans to reduce its debt,” according to a Feb. 20 report.Other candidates include Weatherford International Plc, NaborsIndustries Ltd., Canadian Oil Sands Ltd., and DCP Midstream LLC,according to Barclays analysts.

Crude prices have plunged 54 percent since last year's peak of$107 a barrel, the result of the U.S. producing more oil at thesame time that a slowing global economy curbs demand. Transocean,which provides offshore drilling services for energy companies, isfacing falling demand for its equipment as producers cutspending.

“The oil sell-off drastically changed the fundamental picture”for energy companies, the Barclays analysts wrote. It “has pushedseveral large credits to the precipice of downgrade frominvestment-grade to high-yield.”

Pam Easton, a Transocean spokeswoman, declined to comment.

While fallen angels account for only 7 percent of the U.S.high-yield bond market currently, Wells Fargo analysts said theproportion may rise quickly. Ratings companies such as Standard& Poor's and Moody's Investors Service tend to lower the gradesin specific industries in waves.

“We recommend high-yield investors begin to do credit analysis,”so they can get a head-start taking advantage of companies' fallfrom grace, Wells Fargo analysts Winifred Cisar and Logan Millerwrote in the Feb. 17 report.

Losing top-tier rankings is a blow to corporations that facehigher borrowing costs and a smaller pool of investors willing tobuy their debt. But the trend may be a blessing for bond buyersready to take advantage of their fall from grace.

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