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Investment-grade rating

Structure The introduction of moderate leverage allowed junior notes (only 3-times leveraged) to receive enhanced returns while still achieving an investment-grade rating (BBB by S P Baa2 by Moody s). [Pg.488]

Companies whose debt securities are rated "investment grade" can usually issue securities in the capital markets at interest rates competitive with, or even lower than, other generally available sources of funds, such as bank loans. The higher the company s rating within the investment grade categories, the lower the company s cost of funds. This reduced cost is a result of the lower interest rate necessary to induce investors to buy the company s securities. ... [Pg.7]

Insurance companies are limited, for example, in the amount of new insurance policies they may issue by the amount of their eligible investments, which are usually defined as securities rated at least investment grade, and other eligible assets. For the "biuk " provision of the NY Insurance Code, see N.Y. Ins. Law 1404 (b) (Consol. 1993). [Pg.9]

To assess the impact of changing yield spreads therefore, it is necessary to carry out a simulation on the effect of different yield curve assumptions. For instance, we may wish to analyse 1-year holding period returns on a portfolio of investment-grade corporate bonds, under an assumption of widening yield spreads. This might be an analysis of the effect on portfolio returns if the yield spread for triple-B-rated bonds widened by 20 basis points, in conjunction with a varying government bond yield. This requires an assessment of a different number of scenarios, in order to capture this interest-rate uncertainty. [Pg.160]

For lower- and non-rated bonds, the observed effect is the opposite to that of an investment-grade corporate. Over time the probability of default decreases therefore, the theoretical default spread decreases over time. This means that the spread on a long-dated bond will be lower than that of a short-dated bond because if the issuer has not defaulted on the long-dated bond in the first few years of its existence, it will then be viewed as a lower risk credit, although the investor may well continue to earn the same yield spread. [Pg.161]

The research compares the model spread to the one observed in the market. In order to determine the term structure of credit spread. Eons uses historical probabilities by Moody s database, adopting a recovery rate of 48.38%. The empirical evidence is that bonds with high investment grade have an upward credit spread curve. Therefore, the spread between defaultable and default-free bonds increases as maturity increases. Conversely, speculative-grade bonds have a negative or flat credit yield curve (Figure 8.7). [Pg.170]

The greater the expected yield volatility, the greater the interest rate risk for a given duration and current value of a position. In the case of non-investment grade bonds, while their durations are less than current coupon Treasuries of the same maturity, the yield volatility is greater than that of current coupon Treasuries. For the 10-year Swiss government bond, while the duration is greater than for a current coupon 10-year US Treasury note, the yield volatility is considerably less than that of 10-year US Treasury notes. [Pg.138]

Despite our focus on the public debt markets, banks still provide the bulk of corporate Europe s credit needs. Bank loans to commercial and industrial borrowers in Europe total 3,000 billion, compared to 651 billion of public fixed-rate investment grade debt. [Pg.179]

Interest rate or term structure risk stems from movements in the benchmark interest rate curve. Excluding exchange rate risk, it is the main source of risk for most investment-grade bonds. Any reasonable model will include markets that are stable and actively traded. A typical coverage, taken from JP Morgan GBI Broad Index, is shown in Exhibit 23.1. Note the presence of two emerging markets. [Pg.728]

The treatment of unrated paper for investment grade indices falls under this category. Many index providers include unrated paper in investment grade indices on the premise that if these instruments were to be rated they would end up in the investment grade. The other area where many index providers often vary from each other is the treatment of splitrated bonds, both for the rating tier they represent, as well as to determine whether they form part of the investment grade universe or not. [Pg.805]

Because the assets are held within an SPV framework, defined in formal legal terms, the originator s financial status and credit rating are almost irrelevant to the bondholders. There may also be a third-party guarantee of credit quality, which enables the securitized notes to be offered with an investment-grade credit rating up to AAA. FIGURE 14.1 shows a simplified process of securitization. [Pg.243]


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See also in sourсe #XX -- [ Pg.486 ]




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