Tena hao Moody's mara nyengine wanapenda ku overreact
“A broker calls you up and says: Do you want to buy this bond?” one prominent fixed-income investor told IFR.
“You say: What’s the rating? He says: S&P, Double A, you say sure. He says: XYZ firm, Double A - the conversation is different.”
That confidence sometimes seems unshakable, even after the agencies come under fire.
Moody‘s, for example, was widely criticized after stripping 19 energy companies of their investment-grade ratings in February and March as oil prices were collapsing.
The downgrades, some as many as five rating notches, added fuel to a sell-off that caused many investors to suffer big losses in their portfolios.
Many market participants thought the agency was overreacting to the oil price swing without accounting for the ultimate ability of the companies to weather the storm.
The companies’ bonds, after declining in price on the downgrade decision, traded back up as oil prices started to recover.
Moreover, Moody’s has been reported to be under investigation by the US Department of Justice over its handling of mortgage bonds in the run-up to the last crash.