Series 50: Bond Rating Services

Taken from our Series 50 Online Guide

Bond Rating Services

Before a bond is issued, it is rated according to its creditworthiness. An issuing municipality hires a private ratings service, such as Standard & Poor’s, Moody’s Investors Services, and Fitch Ratings, to assess its financial strength. The rating agency’s evaluation of the issuer’s ability to pay a bond’s principal and interest in a timely fashion will determine the bond’s coupon rate. The higher the grade, the lower the coupon.

Bond ratings are expressed as letters ranging from AAA to D. A triple-A rating is the most desirable, representing an investment grade bond with minimal credit risk. To be considered investment grade, a bond must be rated a BBB- or better. BB or below is considered non-investment grade. Non-investment grade bonds are also called “junk bonds.”

Each of the services uses the same basic grading system, with some variations in style. Here is a sampler:

Since you're reading about Series 50: Bond Rating Services, you might also be interested in:

Solomon Exam Prep Study Materials for the Series 50
Please Enable Javascript
to view this content!

Moody’s

S&P

Fitch

Investment Grade/Ability to Meet Obligations

Investment Grade

Aaa

AAA

AAA

Highest quality, minimum credit risk

Aa1

AA+

AA+

Aa2

AA

AA

High quality, low credit risk

Aa3

AA-

AA-

A1

A+

A+

A2

A

A

Upper medium