The safest bonds are known as "investment-grade. The table below shows the specifics for long-term bonds. These companies have to pay more in interest to offset the increased risk. Some investors like junk bonds because as long as the issuer doesn't default, the investor can make more money.
The following chart provides further detail on what each letter grade means for the issuing entity. The company analyzes how likely it is that a country will default on its sovereign debt.
There are five areas of assessment: institutional, economic, external, internal, and monetary. Institutional and economic assessments are combined to create an institutional and economic profile of the country.
The remaining three areas of assessment are combined to create a flexibility and performance profile. These profiles are based on the analysis of factors including:.
A Congressional inquiry later determined that these risky conditions were exacerbated by decades of deregulation of the financial industry. As the recession worsened, governments increased spending to stimulate the economy. Many analysts noted the irony in the U. It then punished the government for the debt created by that same recession.
Henry V. Harvard Business School Historical Collections. Accessed Sept. Fidelity Investments. Council on Foreign Relations.
Financial Crisis Inquiry Commission. The Committee for a Responsible Federal Budget. Actively scan device characteristics for identification. Use precise geolocation data. B vulnerable and has significant speculative characteristics; obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties that could lead to the obligor's inadequate capacity to meet its financial commitments.
C vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation.
Also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example, due to automatic stay provisions.
An obligation's rating is lowered to 'D' if it is subject to a distressed exchange offer. All rights reserved. Maintained Resource Type Glossary. Jurisdiction Canada Common Law.
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