The fixed-income portfolio manager you work with asked you why a bond from an issuer you cover

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The fixed-income portfolio manager you work with asked you why a bond from an issuer you cover didn’t rise in price when it was upgraded by Fitch from B+ to BB. Which of the following is the most likely explanation?

A. Bond prices never react to rating changes.

B. The bond doesn’t trade often, so the price hasn’t adjusted to the rating change yet.

C. The market was expecting the rating change, and so it was already “priced in” to the bond.

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Fixed Income Analysis

ISBN: 9781119850540

5th Edition

Authors: Barbara S. Petitt

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Question Posted: Nov 05, 2023 12:47 AM

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The fixed-income portfolio manager you work with asked you why a bond from an issuer you cover

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C is correct The market was anticipating the rating u...View the full answer

Fixed Income Analysis

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