Bond credit rating
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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 Moody's, Standard & Poor's, and Fitch have letter designations such as AAA, B, CC.
| Moody's | S&P | Fitch | ||||
|---|---|---|---|---|---|---|
| Long Term | Short Term | Long Term | Short Term | Long Term | Short Term | |
| Aaa | P-1 | AAA | A-1+ | AAA | A1+ | Prime |
| Aa1 | AA+ | AA+ | High grade | |||
| Aa2 | AA | AA | ||||
| Aa3 | AA- | AA- | ||||
| A1 | A+ | A-1 | A+ | A1 | Upper medium grade | |
| A2 | A | A | ||||
| A3 | P-2 | A- | A-2 | A- | A2 | |
| Baa1 | BBB+ | BBB+ | Lower medium grade | |||
| Baa2 | P-3 | BBB | A-3 | BBB | A3 | |
| Baa3 | BBB- | BBB- | ||||
| Ba1 | Not Prime | BB+ | B | BB+ | B | Non Investment grade speculative |
| Ba2 | BB | BB | ||||
| Ba3 | BB- | BB- | ||||
| B1 | B+ | B+ | Highly Speculative | |||
| B2 | B | B | ||||
| B3 | B- | B- | ||||
| Caa1 | CCC+ | C | CCC | C | Substantial risks | |
| Caa2 | CCC | Extemely speculative | ||||
| Caa3 | CCC- | In default with little prospect for recovery |
||||
| Ca | CC | In default with little prospect for recovery |
||||
| / | D | / | DDD | / | In default | |
| / | DD | |||||
| / | D | |||||
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[edit] Credit rating agencies
In the United States of America, 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.
[edit] 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 CCC (e.g., BBB+, BBB and BBB-), and may also choose to offer guidance (termed a "credit watch") as to whether it is likely to be upgraded (positive), downgraded (negative) or uncertain (neutral).
| Moody's | Standard & Poor's | Credit worthiness |
|---|---|---|
| Aaa | AAA | Triple A = Credit risk almost zero |
| Aa1 | AA+ | Safe investment, low risk of failure |
| Aa2 | AA | " |
| Aa3 | AA- | " |
| A1 | A+ | Safe investment, unless unforeseen events should occur in the economy at large or in that particular field of business |
| A2 | A | " |
| A3 | A- | " |
| Baa1 | BBB+ | Medium safe investment. Occurs often when economy has deteriorated. Problems may arise |
| Baa2 | BBB | " |
| Baa3 | BBB- | " |
| Ba1 | BB+ | Speculative investment. Occurs often in deteriorated circumstances, usually problematic to predict future development |
| Ba2 | BB | " |
| Ba3 | BB- | " |
| B1 | B+ | Speculative investment. Deteriorating situation expected |
| B2 | B | " |
| B3 | B- | " |
| Caa | CCC | High likelihood of bankruptcy or other business interruption |
| Ca | CC | " |
| C | C | " |
| D | Bankruptcy or lasting inability to make payments most likely |
[edit] 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.
