Too many municipal bond investors are of the view - "I hold
to maturityso a rating downgrade doesn't mean any thing to me."
To the contrary, when a holding is downgraded, it means
too much was paid for the risk - foregoing the higher return
available at the lower rating that now applies to the position.
Credit insight identifying risk/reward opportunities and issuers to avoid.
For ivdividuals and advisors who buy or sell municipal bonds in amounts of $100K and more.
give us a call 1 516 280 3577
Know more about professional sports, or high fashion than municipal bonds?Can your broker or advisor opine on the appropriateness of agency ratings on particular bonds understanding that pricing and credit spread are rating dependent?
Just what is the difference in risk of nonpayment between “A” rated and “AA” bonds?
The three largest nationally recognized Credit Rating Agencies do not answer that fundamental question, nor how long can an investor rely on their opinions? WE answer both . (rating scale)
Tax exempt credit spreads can equal 100 basis points, one percent, or more per annum, depending on how the market sees credit risk generally and what bonds are rated. A 50 basis point spread between "A" and "AA" bonds is worth $50,000 in U.S. exempt income on $1 million par over ten years - $10k per 10 basis points.
The informed choice is made when the result of a BBR appraisal is compared to the agency rating opinion on the same bonds. In other words, for example is that "A" rating rightfully a "BBB" and if so is it worth 50 basis points to you now knowing the difference in expected default rate.(credit value index).
It pays to have an expert on your side when acquiring any substantial asset about which investor knowlrdge is limited.
Benchmark Bond Ratings, Inc ®, Garden City, NY Tel 516 280 3577 Fax 516 741 5005