Bond credit rating Totally Explained

Everything about Bond Credit Rating totally explained

In investment, the bond credit rating assesses the credit worthiness of a corporation's debt issues. It is analogous to credit ratings for individuals and countries. The credit rating is a financial indicator to potential investors of debt securities such as bonds. These are assigned by credit rating agencies such as Standard & Poor's and have letter designations such as AAA, B, CC.

Credit Rating Agencies

See also Credit Rating Agency In the United States, there are seven rating agencies that have received the Nationally Recognized Statistical Rating Organization (NRSRO) designation, and are overseen by the SEC in their assignment of credit ratings: Standard & Poor's (S&P), Moody's, Fitch, A. M. Best, Japan Credit Rating Agency, Ltd., Ratings and Investment Information, Inc. and Dominion Bond Rating Service. S&P, Moody's, and Fitch are far larger than Japan CRA, R&I, A.M. Best and Dominion, and dominate the market with approximately 90-95 percent of world market share.

Credit Rating Tiers

Moody's assigns bond credit ratings of Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C, . Standard & Poor's and Fitch assign bond credit ratings of AAA, AA, A, BBB, BB, B, CCC, CC, C, D.
Moody's, S&P and Fitch will all also assign intermediate ratings at levels between AA and B (for example, BBB+, BBB and BBB-), and may also choose to offer guidance (termed a "credit watch") as to whether it's likely to be upgraded (positive), downgraded (negative) or uncertain (neutral).

Municipal Bonds

Municipal bonds, instruments issued by local, state, or federal governments in the United States, have a separate naming/classification system which mirrors the tiers for corporate debt.

AAA Ratings

As of 2005, there are only 8 North American companies rated AAA by all three major credit agencies:

Further Information

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