Is a credit rating a recommendation to invest in a debt instrument?
A credit rating is not a recommendation to buy, hold or sell a debt instrument. A rating is one of the inputs that is used by investors to make an investment decision. Investors also look at the returns being offered on the debt instrument. Normally investors expect higher returns for lower rated instruments to compensate for the increased risk profile. Rating agencies do not comment on the return being offered on a debt instrument. Also, investors use several other factors like level of portfolio diversification and liquidity levels of the instrument etc. in making investment decisions.
