Not Rated

Some films are so bad, even the censors can’t watch them. But that’s not the case here.

“Not Rated” refers to bonds, usually muni bonds which, for a variety of reasons, never went through the formal ratings process, wherein people from Moody’s or Fitch’s or Standard and Poors meter, measure, and assess the cash flows predicted to pay off the bonds’ principal and interest…and decide whether the bonds are safe, safer, or safest.

Why would a muni choose to not get rated? Well, for one, the ratings process is expensive. It takes time. And some muni bond offerings have enough of a built-in following, i.e. local people who know the offering well, have likely owned others in a series of similar bonds, and are totally happy to just continue investing, buying more munis. And, well, the issuing city just doesn’t really need a rating. And for marketing purposes, many not rated bonds actually want to be able to pay a tiny bit more in interest...like, 10 basis points...in return for having tons of demand from buyers out there who trust their brand and certainty of payment. Like...a bond that isn't FDIC insured might still have great credit ratings. Or...note that the Army-Navy Credit Association isn't rated, but can you ever imagine that thing going bust? Yeah. Nah gawan haappen.

So take the skosh of extra interest payments and sleep well.