Definition of Bond ratings:
Bonds are ranked on the basis of the degree of risk associated with timely payment of their interest and principle. Bond rating agencies (such as Standard & Poors) use a grading system as follows (1) AAA: highest quality (called gilt edged). (2) AA: high quality. (3) A: upper medium grade. (4) BBB: medium grade. (5) BB: has speculative elements. (6) B: speculative. (7) CCC: speculative with possibility of default. (8) CC: most speculative. (9) C: lowest gradable quality. (10) DDD: in default with possibility of recovery. (11) DD: in default and arrears. (12) D: in default, with little or no value. Bonds rated BBB or higher are considered investment grade suitable for financial institutions with fiduciary responsibilities. Bonds rated below B are considered speculative grade and are called high yield or junk bonds which, due to greater likelihood of their default, must pay higher interest rates to attract investors.
How to use Bond ratings in a sentence?
- The bond ratings were a lot different than I had predicted and I wondered if that would be good, or bad for us.
- When investing in bonds or bond funds, it is prudent to purchase such instruments with bond ratings of AA or higher, to ensure the safety of your money.
- You should always check the bond ratings and follow them for awhile before you decide it is right to invest,.
Meaning of Bond ratings & Bond ratings Definition