Bond Ratings
Bond Ratings - Fidelity Please enter a valid email address Please enter a valid email address Important legal information about the email you will be sending. By using this service, you agree to input your real email address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an email. All information you provide will be used by Fidelity solely for the purpose of sending the email on your behalf. The subject line of the email you send will be "Fidelity.com: " Your email has been sent.
Moody's, Standard & Poor's, and Fitch append their ratings with an indicator to show a bond's ranking within a category. Moody's uses a numerical indicator. For example, A1 is better than A2 (but still not as good as Aa3). Standard & Poor's and Fitch use a plus or minus indicator. For example, A+ is better than A, and A is better than A-. Remember that ratings aren't perfect and can't tell you whether or not your investment will go up or down in value. Before using ratings as one factor in your investment selection process, learn about the methodologies and criteria each ratings agency employs. You might find some methods more useful than others.
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Clicking a link will open a new window. Just as individuals have their own credit report and rating issued by credit bureaus, bond issuers generally are evaluated by their own set of ratings agencies to assess their creditworthiness. There are 3 main ratings agencies that evaluate the creditworthiness of bonds: Moody's, Standard & Poor's, and Fitch. Their opinions of that creditworthiness—in other words, the issuer's financial ability to make interest payments and repay the loan in full at maturity—is what determines the bond's rating and also affects the yield the issuer must pay to entice investors. Lower-rated bonds generally offer higher yields to compensate investors for the additional risk.How bond ratings work
Ratings agencies research the financial health of each bond issuer (including issuers of municipal bonds) and assign ratings to the bonds being offered. Each agency has a similar hierarchy to help investors assess that bond's credit quality compared to other bonds. Bonds with a rating of BBB- (on the Standard & Poor's and Fitch scale) or Baa3 (on Moody's) or better are considered "investment-grade." Bonds with lower ratings are considered "speculative" and often referred to as "high-yield" or "junk" bonds. Investment grade Moody's Standard & Poor's Fitch Strongest 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- Non-investment-grade 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 Weakest Moody's Standard & Poor's Fitch C C C D D Sources: SIFMA, Fitch, Moody's, Standard & Poor'sMoody's, Standard & Poor's, and Fitch append their ratings with an indicator to show a bond's ranking within a category. Moody's uses a numerical indicator. For example, A1 is better than A2 (but still not as good as Aa3). Standard & Poor's and Fitch use a plus or minus indicator. For example, A+ is better than A, and A is better than A-. Remember that ratings aren't perfect and can't tell you whether or not your investment will go up or down in value. Before using ratings as one factor in your investment selection process, learn about the methodologies and criteria each ratings agency employs. You might find some methods more useful than others.