The CDO community is the fastest growing customer base in line for a relatively new analytic system offered by Moody's Investors Service - so-called market-implied ratings. In short, the system tracks the gap between what the secondary market assesses as the chance of a security defaulting, versus the rating agency's own credit rating for the bond. And while the tool is only applicable to the cash and synthetic corporate bond sectors and it is not used by Moody's analysts as a precursor for ratings changes per se, the principle behind the system has "profound implications for the financial market," said Moody's Managing Director David Munves, who invented the system.

The system aims, in part, to tackle the long-held criticism of rating agencies that perhaps they don't move swiftly enough to warn investors of an imminent downturn in credit quality. By displaying the side-by-side comparison for investors of the market's value of a particular security versus its rating, an investor is able to decipher - both on a historical and real-time basis - whether that security is trading cheap or rich to its rating.

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