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.
Related or Semi-related Video
Finance: What is Fitch Investors Service...6 Views
Finance a la shmoop what is Fitch investors service? Google, Facebook, Amazon
the big three not least they are this week well for a much longer time Fitch
has been the third leg on the you know stool Moody's supports this leg standard [Fitch, Moody's and S&P shown on a stool]
and poors supports this leg and the big fat guy who sits right here yeah that's
you, you the big fat walletd bond investor who relies on the scores of
rating services in part like these to figure out how much risk premium you
should attach to the bonds you're buying or rather the interest rate rent you
should be charging the issuers for the privilege of renting your money
well distinctively for Fitch's rating service well it's owned mostly by Hurst
yes William Randolph flavored that Hurst you know rosebud [Man whispers rosebud]
yeah well that's William Randolph yeah first big swing and media mogul no other
kind of mogul you know if we lose a million dollars a year we'll have to
shut our doors you know a hundred years yeah that one all right well Fitch's is
a hundred-year-old global firm with feet in london and new york and well pretty
much everywhere people rent money in the form of bonds and after all that time [Fitch's locations appear across the map]
you'd think they could have come up with something a bit more creative than their
bond rating system right here this thing yeah
looks eerily similar to those of Moody's and Standard & Poor's hmm and well had
shmoop owned a bond rating service well we'd have had ratings like this [Shmoop ratings service appears]
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