Industry risk in fixed income securities

 The industry risk in fixed-income securities is no different than the risk faced by any other industry. It is the risk of the market and industry-wide disruption.

Fixed-income risks are risks that arise from market interest rates, credit ratings, and conditions in the financial markets. They are the result of the business risk and the credit risk inherent in debt securities and are the responsibility of the issuer and its executives.

One of the most important risks facing investors today is the increased volatility in fixed-income securities. When the market was at its strongest, investors had little need to worry about interest rates and other traditional risks in fixed income. But now, with the market experiencing its most volatile stretch in decades and interest rates at historic lows, investors are finding themselves needing to adjust their exposure to fixed income.

The fixed-income sector may be exposed to changes in interest rates, credit quality, and inflation. The risk of rising interest rates, which revolve around the Federal Reserve's monetary policy, was discussed earlier. Credit quality problems can also have a dramatic impact on the fixed income market. They include issues with mortgage-backed securities, credit card debt, and auto loans; as well as non-prime loans, which generally include bad credit ratings, high-interest rates, and/or poor payment track records.

A credit rating downgrade can have a major impact on the stock market, increasing borrowing costs and making it more difficult for businesses to access the capital they need to grow and create jobs. An economy-wide recession caused by a financial crisis or a downturn in the economy could also lead to a credit rating downgrade, which would increase borrowing costs for consumers and businesses and could hurt financial markets and the economy as a whole.