Consistency of Credit Ratings in Thai Bond Market
Post by MSF Chula at Sunday, 10 January 2021 03:32 PM

Do higher rating bonds always exhibit higher price than lower rating bonds? This paper examines the consistency of bond credit ratings and market price of Thai corporate bonds by comparing the differences between actual market price and estimated price using interest rate curve implied by Nelson Siegel curve fit method. We find that bond ratings are significantly inconsistent with their prices cross-sectionally and overtime. In particular, bonds in AA rating appears to have high inconsistency with their pricing overtime on average while bonds in BBB rating appears to be the lowest. High inconsistency in AA rating are due to high variation of prices which could result in both underpriced and overpriced. Participants in Thai corporate bonds should make an investment in AA rating bonds with cautious and should closely monitor such bonds before and after making any investment decisions.

Last updated at Sunday, 10 January 2021 03:32 PM