3. Defining the Market and the Ratings Agencies

What’s in this chapter:

• How the market is defined by the ratings agencies

• Agency ratings and price impact

• Ways to use the ratings agencies

The leveraged finance market is also called the high yield market and the junk bond market. The leveraged finance market is generally defined to include bonds and loans issued by corporations that the major credit rating agencies (Moody’s, Standard & Poor’s [S&P], and sometimes Fitch) have assigned ratings they believe are below investment grade. Many pools of investment money have strict limits on investing in bonds/loans rated below investment grade.

Although it never caught on, I always liked the idea of referring to the market as the BIG debt market—as ...

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