Credit Ratings of Bonds

From Financial Literacy Wiki

Credit rating of bonds assesses the credit worthiness of a corporation. It is analogous to credit ratings for individuals. The credit rating is a financial indicator to potential investors or holders of debt securities. These are assigned by credit rating agencies.

In the United States, there are five corporations 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 and Dominion Bond Rating Service. And out the five, S&P, Moody's, and Fitch are the largest and most mentioned in newspaper. Take note that these credit rating agencies also issues credit ratings for bonds issued by a country's government as well.

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 (e.g., BBB+, BBB and BBB-), and may also choose to offer credit guidance as to whether a particular debt securities' rating is likely to be upgraded (positive), downgraded (negative) or uncertain (neutral).