About Bond Ratings

There are three companies that assign a rating to virtually every bond issued in the United States:

These ratings are a key part of the way the bond market functions.

The ratings serve two functions. First, they help investors make a decision about the quality of the bond (i.e. the likelihood of the issuer defaulting on the bond). Second, the ratings are used to classify every bond into one of two categories: "investment grade" bonds, or "high yield" bonds. These two bond categories are widely used to build portfolios, with every investor deciding how much of their portfolio to allocate to investment grade versus high yield bonds. High yield bonds are sometimes referred to as "junk bonds".

Unfortunately, the three companies don't use the same ratings system. But the rating systems are close enough to be workable:

Investment grade Moody's Standard & Poor's Fitch
Aaa AAA AAA
Aa1 AA+ AA+
Aa2 AA AA
Aa3 AA- AA-
A1 A+ A+
A2 A A
A3 A- A-
Baa1 BBB+ BBB+
Baa2 BBB BBB
Baa3 BBB- BBB-


High yield Moody's Standard & Poor's Fitch
Ba1 BB+ BB+
Ba2 BB BB
Ba3 BB- BB-
B1 B+ B+
B2 B B
B3 B- B-
Caa1 CCC+ CCC+
Caa2 CCC CCC
Caa3 CCC- CCC-
Ca CC CC
C C C
D D

All data is a live query from our database. The wording was last updated: 12/19/2018.

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