The market will likely demand a higher yield from the downgraded bond (the risk premium has increased) and thus the price will likely fall. Technical default usually refers to an issuer’s violation of bond covenants, such as debt ratios, rather than the failure to pay interest or principal. In the event of default, the holder (lender) may recover some or all of the investment through legal action or negotiation. The percentage recovered is known as the recovery rate. Rating agencies such as Moody’s and Standard and Poor’s assign bond ratings. The market reflects these ratings through a higher or lower market yield.