Friday, 21 December 2018

Quality level characteristics & rating

Quality level characteristics

The two systems from the level of bonds is Moody's and Standard & poor's. Two of these systems, high-grade means having low credit risk, or conversely. The likelihood of a high paid for in the future. Grade bonds the highest set by Moody's and Aaa, with writing by Standard & poor's AAA with writing. Next level written Aa or AA. Then the second third level the agency uses Three writing

A. grade is the next Baa or BBB, Ba or BB, and

B. There is also grade

C. Bonds in the level triple A (AAA or Aaa) is call the primary bond, double.

A (AA or Aa) is A single high quality publish in the upper medium-grade and triple B (BBB or Baa) is a medium-grade. These four categories are refer to as investment grade. Low rate bonds have speculative elements or at high risk. Usually these bonds are known as high-yield or junk bond.


The following are the ratings of bonds, according to Standard & poor's and Moody's are taken from the source: The data comes from the various editions of the Standard & poor's and Moody's Bond Guide Sometimes both Moody's and Standard & poor's using the adjustment for the ranks: Standard & poor's using the plus sign and minus: A + shows A ranking of the best and the most A-low. Moody's uses 1, 2 or 3, where 1 indicates the strongest.

Issuance of credit rating based on the level difference on the consideration as follows:

  1. The possibility of payment capacity and willingness of the obligor to meet its financial commitment on the obligation in accordance with the terms of the bonds.

  2. Nature and conditions of the bonds.

  3. The protection provided, and the relative position of the bonds at the time of the bankruptcy, the renewal of the Organization, and other preparation under the law of bankruptcy and other legal influence the rights of the creditors.

Level rating on bonds are as follows:


A bond rated ' AAA ' has had the highest rating given by Standard & Poor's. The capacity of the obligor to meet its financial commitment on the outstanding bonds are strong.


A bond rated ' AA ' difference with the value of the bonds-bonds of highest just a bit. The capacity of the obligor to meet its financial commitment on the obligation is extremely strong.


A bond rated ' A ' is slightly easier subject to adverse influences of changes in circumstances and economic conditions on the bonds in the highest scoring category.


A bond rated ' BBB ' show up its ability protect parameter. However, economic conditions or changing circumstances are more role seems to harm the capacity of obligor makes it weak to meet financial commitments from the bond. The bonds are rated ' BB ', ' B ', ' CCC ', ' CC ', ' C ' is considered to have a significant speculative characteristic. ' W ' indicates the lowest level of speculation and ' C ' is the highest. While some bonds seem to have some of the characteristics of quality and protection that may be its uncertainty too heavy and bulky or opinions in General including adverse conditions.


A bond rated ' BB ' unpaid criticism gets less than publishing is speculative. However, the main thing is constantly facing uncertainty or revenues in business, finance, or adverse economic conditions in which the role of the obligor capacity to meet financial commitments on the bonds is not insufficient.


A bond rated ' B ' more easily critiqued not paid than a bond rated ' BB ', but the obligor often meets his/her financial commitment capacity on the bond. Business, financial, or economic conditions seem to be destructive capacity of oblige or in fact to meet financial commitments on bonds


A bond rated ' CCC ' more easily critiqued not paid and depending on the business, financial, or economic conditions both for financial commitments the obligatory on the bond. At the time of the business, financial, and adverse economic conditions, the obligatory does not seem to meet financial commitments on capacity in the bond.


A bond rate ' CC ' is often criticize of not getting paid.


Rating the ' C ' may be used to protect a situation. Where a bankruptcy petition filing has been fill or similar action has been take. But payments on this obligating still continues.


A bond that is rates’ ' is in the failure of payment, the rating category. 'D ' is used when a bond payment was not made on a fixed time if the period of respite time which can be used not unless expired, if Standard & Poor believes that similar payments will be made before the period of respite time is similar. Ratings of 'd ' is also use in the filling of a bankruptcy petition filing or retrieval of similar actions if payment on a bond is dangerous.

Some sort of type of investors with regard to the passing on of investment risk:

  1. Conservative investors. Tolerance of risk tend to be small. The percentage of stock allocation to investors the type like this is 100 minus their age. People like this can do a split or division between cash and bonds in investing. An investor type 30-year-old conservative can invest 70 percent in stocks and 30 percent in bonds and money market securities.

  2. Moderate investors. Tolerance of risk is higher than the conservative investors. The percentage of stock allocation to investors the type like this is 110 minus their age.

  3. Aggressive investors. Tolerance of high risk. The percentage of stock allocation to investors the type like this is 120 minus their age.

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