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Bond Buyers Easing Rating Requirements to Shop for More Deals 

June 23, 2015

Matt Scully, Bloomberg

Institutional investors are rewriting their old rules so they can buy bonds assigned credit ratings by a broader variety of firms, according to Kroll Bond Rating Agency Inc. and Morningstar Inc.

Over the past year, more than 30 investment firms have eased internal guidelines that limited them to bonds rated by at least one or two of the top three graders: Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, said Kim Diamond, Kroll’s head of structured finance.

The loosening comes as some of the biggest bond buyers vocalize frustration that the so-called Big Three ratings firms are being hired less, resulting in fewer bond offerings from which they can choose.

“Issuers want more viewpoints out there,” said Vickie Tillman, president of Morningstar’s ratings unit.

The number of bond deals rated by just Kroll this year has jumped to more than 120 from 30 at this time last year, according to the company. Morningstar also is being hired more. Its ratings of commercial-mortgage bonds, for example, have grown 173 percent since 2012, according to the firm.

Read more: Bloomberg

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