Bond Ratings

Standard and Poor’s and Moody’s are financial services companies that provide risk ratings on bonds. The risk is whether the bond issuer will default on either the interest payment, on repaying the principle, or both. These ratings range from AAA to DDD for Standard and Poor’s and from AAA to C for Moody’s. New bond issues almost always will ask one of these agencies to provide a rating. Bonds with a rating of BBB- (on theStandard & Poor’s) or Baa3 (onMoody’s) or better are considered investment-grade. Bonds with lower ratings are considered speculative and often referred to as high-yield or junk bonds.