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 & Poor’s) 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.