Understanding Standard & Poor's
Rating Definitions
Standard & Poor's credit ratings are designed primarily to provide relative rankings among issuers and obligations of overall creditworthiness; the ratings are not measures of absolute default probability. Creditworthiness encompasses likelihood of default, and also includes (i) payment priority, (ii) recovery, and (iii) credit stability.
In addition, our rating symbols are intended to connote the same general level of creditworthiness for issuers and bonds in different sectors and at different times. In order to promote the comparability of ratings across sectors, geographies, and over time, we are introducing stress scenarios associated with each rating category. These stress scenarios will be an important tool for calibrating our criteria to help maintain comparability. The scenarios will not become part of the rating definitions. Nor will they be the sole or primary drivers of our criteria.
Standard & Poor’s is introducing the new market derived signal (MDS) measurement. MDS is based upon credit default swap spreads and augmented using proprietary modeling techniques that adjust the model for certain variables. MDS is intended to capture the market sentiment regarding a company’s perceived credit risk. It is not based on our rating criteria and therefore is not a surrogate for Standard & Poor’s issuer ratings that assess a company's creditworthiness. The attached White Paper explains in depth how S&P determines the MDS, including all calculations and benchmarks.
Mix news on economic data. The continued lack of inflation should help the Fed maintain its easy monetary policy. Inflation is not likely to be a problem in the coming year.
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