How to Read Bond Ratings

Part of the Bond Investing For Dummies Cheat Sheet

Before you buy a bond, get an idea of how much financial muscle the issuer has. Bond ratings are available through any brokerage house. Three of the most popular rating services are Moody’s, Standard & Poor’s, and Fitch. The following table shows the system each uses to rate bonds:

Bond Credit Quality Ratings
Credit risk ratings Moody’s Standard & Poor’s Fitch
Investment grade
Tip-top quality Aaa AAA AAA
Premium quality Aa AA AA
Near-premium quality A A A
Take-home-to-Mom quality Baa BBB BBB
Not investment grade
Borderline ugly Ba BB BB
Ugly B B B
Definitely don’t-take-home-to-Mom quality Caa CCC CCC
You’ll be extremely lucky to get your money back Ca CC CC
Interest payments have halted or bankruptcy is in process C D C
Already in default C D D

Bond ratings are available through any brokerage house.

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Bond Investing For Dummies Cheat Sheet

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