...Steady Ratings amid Volatile Markets: The steep decline in fixed-rate bond values as yields rose in late 2018 highlights how market values are more sensitive to interest rate changes when interest rates are at historical lows. Investors' concerns that the benign economic backdrop and loose monetary policy may be coming to an end pushed up the cost of new issuance significantly, after a long period of rising bond prices amid ultra-low interest rates. In contrast, our ratings were fairly stable both at the end of 2018 and for several years of low interest rates before then. The chart below compares a US investment-grade bond index, which includes corporates, financials and insurers, with Fitch Ratings' corresponding average credit rating, illustrating the stability of ratings relative to market values. Many Factors Drive Market Values: Market prices of fixed-rate bonds are influenced by several considerations and many governments appear to have reached the limits of fiscal stimulus. Private-sector...
