New Open Source Government Bond Rating Tool

May 9, 2012 by · Leave a Comment
Filed under: General 

In a press release, Public Sector Credit Solutions and PF2 Securities Evaluations announced that they have released an open source framework for analyzing and rating government bonds.

The tool estimates the risk of default by assessing the likelihood of sovereign, state, and municipal bond issuers exceeding a user-specified fiscal threshold in any given year. This probability is then converted into a rating.

PF2 Consultant Marc Joffe explains that the tool’s objectivity is its greatest benefit. “Rating agency sovereign and muni bond groups do not take advantage of the power and objectivity of quantitative techniques, leaving their methodologies vulnerable to bias and inconsistency,”

The tool’s open source platform is also an advantage. Anthony Randazzo, Director of Economic Research at The Reason Foundation, commented, “An open source tool like PSCF is a great answer to complaints about rating agency transparency. By linking a government’s projected debt burden to its risk, the framework sends the right signal both to bondholders and policymakers.”

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