Different sources give me different answers on this:

Are credit ratings of credit rating agencies per bond or per issuer?

If the rating is defined as the likelihood of getting your investment back, then surly the longer the time to maturity the lower rating but if the rating reflects the default probability within a fixed time period I guess an issuer level rating makes sense.

Somewhat related to this question, are CDS bought for individual bonds, for an issuer, or for specific tenures of an issuer?

1 Answer 1

  1. Both. Moody's, S&P, and Fitch assign both issue ratings (for a particular bond), and issuer ratings. When you're looking at a particular bond, sometimes there are both issuer and issue ratings (and sometimes they differ if this bond differs from other bonds - it may be subordinated, or it may have collateral, or some other features that affect the rating). Sometimes there is only issue rating (and if you're really looking for the issuer rating, then you need to consider whether you can extrapolate this bond's rating to their other bonds). Sometimes there is only issuer rating (and if you're really looking for the issue rating, then you need to consider whether it's OK to use the issuer rating for this issue).

  2. For some agencies, the rating is driven only by the likelihood of default. However some agencies consider both the likelihood of default and also the loss given default.

  3. a CDS has a reference obligation. However it really references all other instruments that are pari passu with the ref ob. So it's broader than a single bond, more narrow than the entire reference entity (issuer), but in between - the entire tier of debt, almost always the senior unsecured one.

  4. a CDS has a maturity date. 5 years is by far the most liquid tenor, but other CDS tenors trade as well, just with wider bid-offer.

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