Fixed Income Securities: Legal and Political Risk

 For investors, the fixed income markets can be a challenging arena. They are not for the faint of heart.

The legal risk in fixed income securities was a feasible concern for most investors in the era before the enactment of new regulations. Fixed income security is a debt security whose value is not directly tied to the price of an asset. From a legal perspective, they are not considered to be investing in a single asset but rather are a collection of different assets. This distinction is important since the obligations of debt are generally more limited than those of an asset.

The legal and political risk of fixed-income securities has increased in recent years. This section considers the legal and political risks of making fixed income investments, which include bonds and notes, as well as the insurance implications that may arise.

Fixed income securities are generally not regarded as particularly risky compared to other asset classes, legal or political risks to the issuer are often not something that investors consider in their decision-making. However, this is not the case for fixed income securities when the interest rate or exchange rate outlook is uncertain. As a result, companies that issue fixed income securities encounter legal and political risks when the interest rate outlook is uncertain.