An investor has formed expectations across four bond rating categories and intends to overweight the category with
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An investor has formed expectations across four bond rating categories and intends to overweight the category with the highest expected excess return over the next 12 months. Evaluate which rating group is the most attractive based on the information in the following table and assuming no change in spread duration:
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Rating Category A Baa Ba B Current OAS 1.05% 1.35% 2.45% 3.50% Expected AOAS -0.25% -0.35% -0.50% -0.75% Expected Loss (POD X LGD) 0.06% 0.30% 0.60% 3.00% EffSpreadDur 5.5 6.0 4.5 4.0
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