Editor's letter


Credit magazine has learned that Fitch Ratings is lobbying Lehman Brothers to include Fitch’s ratings in their indices. Until relatively recently Lehman Brothers’ Fixed-Income Aggregate Index only used Moody’s ratings. Now Lehman takes the lower of Moody’s and Standard & Poor’s ratings. And Fitch would like to join the party.

The potential benefits to Fitch are obvious. Currently if Fitch is the only rating agency that rates a bond, then that bond will not be included in Lehman’s index. This clearly discourages issuers from using Fitch, at least as first choice, for their ratings.

The investors that drew Credit’s attention to Fitch’s campaign are broadly supportive. Whether a bond falls out of or stays in the index is currently at the whim of one rating agency; with more ratings considered, the influence of any one agency would be reduced. However this assumes that all or most corporates would pay for three ratings and that Lehman’s will use the mode or the mean, rather than continue with the lowest.

All things considered, the less the market is beholden to the view of one agency, the more efficient it should become.

Over the past month, Credit has been garnering feedback from its buy-side readers on the content of the magazine and its layout. The responses have been reassuringly positive. However, some issues were raised. Readers wanted to see the commentary articles all in one place, and they found the market data and sector roundup sections of limited use.

As a result, the comment pages have been moved into one section, where you find them now. Along with our existing columnists, Louise Purtle and Martin Fridson, we have also added a commentary from an investment consultant, who will look at flows of pension money into and out of credit and how successful fund managers are at investing in credit. Finally Credit has introduced a letters page, to which we welcome contributions (credit@riskwaters.com). We hope that you enjoy this new layout and find it easy to navigate.

David Watts

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