What Are the Major Bond Credit Rating Organizations?
What Are the Major Bond Credit Rating Organizations?
A bond’s investment risk is determined largely by its credit rating. A credit rating is an assessment of a bond issuer’s ability to pay back its bonds. The better a bond is rated, the lower its default risk. Unfortunately, this may also result in a lower potential return.
Things To Know
- Moody’s, S&P, and Fitch are the major raters.
There are three major agencies that provide bond credit ratings. These agencies are the following:
- Moody’s Investors Service
- Standard & Poor’s Corporation
- Fitch Ratings
What goes into a rating?
Ratings are based on the financial stability of the issuer, the issuer’s debts, and its revenue and collateral sources. A bond’s credit is measured by a grading system. The best, most creditworthy rating is AAA (Aaa for Moody’s). Bonds rated below BBB (Baa for Moody’s) are considered to be below investment grade and carry a higher default risk.
Why ratings changed
Ratings can change based on new information about the issuer. If a bond’s credit rating changes, these agencies will issue a credit or rating watch. Ratings information can be accessed through the Internet or by reading published reports at your local library.
