Credit Spread

  

Categories: Bonds, Econ, Metrics

Credit spreads compare how much an investor could make on a Treasury security (government) versus some other debt security that’s not issued by the government.

Since the government doesn’t back the other securities, they are obviously a bit riskier (because there's a better chance they'll default, i.e. you won’t get paid) and have higher interest rates to make up for the risk.

Yeah...it's the whole "greater the risk, greater the reward" shtick.

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Finance: What is the Credit Rating Agenc...4 Views

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Finance allah shmoop what is the credit rating agency reform

00:07

act of two thousand six otherwise known as crack are

00:12

out out something like that All right yeah that's How

00:16

the real pros said anyway this act was meant to

00:19

improve the quality of company credit ratings like a blindfold

00:24

and dartboard should not be involved in making up are

00:27

you know coming up with corporate credit ratings Well the

00:30

law was ironically enacted in the hope that we would

00:33

avoid nightmares like the subprime mortgage crisis that almost brought

00:37

down the finances of while the entire country in world

00:40

And yes it worked in the same way that a

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scale works in an embarrassing episode of the biggest loser

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The idea was that the big three agencies moody's s

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and p and fitch were colluding with each other and

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raiding every security as a okay sort of the same

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way wall street cell site analysts were leaned upon in

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the nineties by bankers who paid them to rate every

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company of strong by so that the companies would favor

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the investment banks when doing lucrative secondary offerings and other

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personal wealth management services for the founders and senior executives

01:17

Newly ridge from you know aipo booty The big three

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then produced a product that wasn't reflective of the real

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risks inherent in the marketplace Basically they had been labeling

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pink slime and hot dog meat as great a sirloin

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Yeah well the act made it much easier for smaller

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firms to compete for business by doing high quality research

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and not being afraid to give bad ratings tow bad

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money butchers will The credit rating agency reform act of

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o sixth gives both businesses and the government the tools

01:49

they need to fight off the shady hucksters of the

01:51

world And make sure the pink slime never you know 00:01:55.443 --> [endTime] such a cz your plate financially

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