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Assessing Corporate Bonds for KYC Risk Level

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Dec 29, 2020 4:01 pm

In 2020 our dealer changed from assessing corporate bonds using ratings services (AAA, AA, etc) to using a formula where a bond is now considered high risk if the yield is more than 2.5% greater than the risk free rate (eg. Tbills). This has caused a lot of BBB rated bonds that were considered medium risk to now be considered high risk. It is leading to hundreds of needs to revisit KYC for client accounts. I would like to hear from other financial adivisors in a variety of brokerages to understand what approach your firm uses - thanks in advance! Kurt