Bond Ratings

26/01/2021 0 By indiafreenotes

Bond ratings are representations of the creditworthiness of corporate or government bonds. The ratings are published by credit rating agencies and provide evaluations of a bond issuer’s financial strength and capacity to repay the bond’s principal and interest according to the contract.

Investment grade Moody’s Standard & Poor’s Fitch
Strongest Aaa AAA AAA
  Aa1 AA+ AA+
  Aa2 AA AA
  Aa3 AA- AA-
  A1 A+ A+
  A2 A A
  A3 A- A-
  Baa1 BBB+ BBB+
  Baa2 BBB BBB
  Baa3 BBB- BBB-

Non-investment-grade Moody’s Standard & Poor’s Fitch
  Ba1 BB+ BB+
  Ba2 BB BB
  Ba3 BB- BB-
  B1 B+ B+
  B2 B B
  B3 B- B-
  Caa1 CCC+ CCC+ 
  Caa2 CCC CCC
  Caa3 CCC-  CCC-
  Ca CC CC

Weakest Moody’s Standard & Poor’s Fitch
  C C C
    D D

Investment grade and high yield bonds

Investors typically group bond ratings into 2 major categories:

  • Investment-grade refers to bonds rated Baa3/BBB- or better.
  • High-yield (also referred to as “non-investment-grade” or “junk” bonds) pertains to bonds rated Ba1/BB+ and lower.