Bonds at the U.S.
Bond market turning 3 basic types of zero coupon bonds: Treasury zero coupon bonds, corporate bonds and zero coupon municipal bonds with no coupons. Treasury zero coupon bonds are generally considered the least risky of the three types of securities, since they are fully guaranteed by the federal government. Corporate zero coupon bonds offer potentially higher returns to compensate for added risk, the extent of which varies depending on the issuer. The credit quality. Bonds may have a variety of credit quality: from the treasury obligations fully guaranteed by the U.S. government, to bonds rated below investment grade, which are regarded as speculative. Issuing bonds, the issuer must provide detailed information on its financial position and solvency. This information is contained in the prospectus, but it is difficult to draw a conclusion as to whether the company or government agency can pay regular interest payments over 5, 10, 20 or 30 years after issuance. To help come to the rating agencies that assign many bonds rated at the time of issue and then monitor them during their life cycle. Brokerage firms and banks also have a staff of analysts who track the ability (and willingness) of various companies and other issuers to pay interest and at maturity repurchase securities at nominal value. The leading rating agencies are Moody's Investors Service, Standard & Poor's Corporation and Fitch. Each of the agencies assign bond ratings on its own system, based on a thorough analysis of the financial situation of the issuer, quality management, economic factors and the specific sources of income to guarantee payments on bonds. The highest rating is "AAA" (S & P and Fitch) and Aaa (Moody's). Bonds with a rating category of "BBB" or higher are considered investment grade bonds, bonds with a rating of "BB" or below are considered high-yield bonds, or bonds below investment grade. While experience shows that a diversified portfolio of high yield bonds in the long run has a very low risk of default, it is extremely important to realize that for every bond taken in isolation, high yield, usually accompanies a low rating, is a wake-up call, warning of a higher risk. Usually, the agency signals that are considering changing the rating of the bonds, putting them in a list of carefully monitored securities: CreditWatch (S & P), Under Review (Moody's) or the Rating Watch (Fitch).
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