Series 79: A1.6.4. Bond Ratings

Taken from our Series 79 Online Guide

A1.6.4. Bond Ratings

Various credit rating agencies (which are required to register with the SEC) analyze and rate the creditworthiness of bonds. A higher credit rating means a lower risk of default, which generally translates to a lower interest rate that the issuer must pay to entice bond purchasers. Bonds with credit ratings above a certain threshold, as indicated on the tables below, are considered investment grade.

The three main credit rating agencies are Standard & Poor’s (S&P), Moody’s Investors Service (Moody’s), and Fitch Ratings (Fitch). Nationally recognized rating agencies are required to register with the SEC.

These agencies rank investment grade bond issuers as follows:

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Investment Grade

Moody’s

S&P

Fitch

Investment Grade /
Ability to Meet Obligations

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

A3

A-

A-

Baa1

BBB+

BBB+