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A-Team Insight Blogs

Moody’s Acquires Mergent Evaluations Business, Plans to Offer Full Range of Fixed Income Prices

Moody’s has agreed to acquire the assets of Mergent Pricing and Evaluation Service from Xinhua Finance subsidiary Mergent, and will integrate the pricing service for corporate and municipal bonds into Moody’s Evaluations in a bid to offer a complete range of fixed income valuation services.

Mergent will support Moody’s new service offering by providing its terms and conditions database of North American issued corporate and municipal bonds for an annual royalty fee. Moody’s will also partner with Mergent to market Mergent’s fixed income terms and conditions data – which, the vendors say, will complement Moody’s resources in the area of mortgage-backed securities and structured products.

Mergent’s Pricing and Evaluation Service was established in 2004 to provide market traders with evaluated prices for bonds at the end of trading days, utilising Mergent’s fixed income terms and conditions data. Mergent will continue to own and sell its fixed income terms and conditions database after the transaction.

Moody’s Evaluations will focus on developing and providing pricing services, beginning with evaluated pricing information for the corporate and municipal bond market and expanding to other asset classes. The vendor reckons Moody’s Evaluations complements Moody’s broader pricing and securities valuation initiatives. In addition to Mergent’s corporate and municipal bond pricing services, Moody’s new model-based valuations for structured securities – Credit Values DCV – will position the firm to offer a complete range of fixed income valuation services, it reckons.

This strategy of providing evaluated prices for the broadest possible range of instrument types is in keeping with that of other data vendors active in the space, including Reuters, Interactive Data and Standard & Poor’s – and imminently, apparently, Bloomberg – many of which are acquiring or partnering with other providers as well as building out their own evaluation capabilities across additional asset classes. This comes in response to client demand to work with as few vendors as possible while ensuring sufficient independence of pricing sources, in order to minimise vendor risk and cost. Moody’s reckons its new unit will meet growing market demand for independent and transparent price and valuation information for both liquid and illiquid securities – an opportunity many of the data vendors have identified given increasing regulatory demand for transparency and recent difficulty in pricing assets since the sub-prime crisis.

Of Xinhua Finance’s decision to divest the Mergent Pricing and Evaluation Service its COO Daniel Connell says: “This market-driven arrangement provides a better environment for the pricing business to grow further under a strong brand name, a dedicated sales force and a complementary addition of liquid and non-liquid securities databases.”

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