Bank Analysis School eBook

APPENDIX B: BOND RATINGS Bond ratings help investors understand the creditworthiness of a bond issuer. Standard & Poor's (S&P) and Moody's Investors Service (Moody's) are prominent independent credit rating agencies which assign bond ratings based on their analysis of an issuer's financial h ealth, economic environment, and other relevant factors. Bond ratings are described in the table below. Subinvestment quality bonds are typically adversely classified during examinations.

S & P’s Rating

Moody’s Rating

Description

AAA

Aaa

Highest Grade

QUALITY INVESTMENTS Includes the four highest rating categories and unrated debt securities of equivalent quality

AA

Aa

High Grade

A

A

Upper Medium Grade

BBB

Baa

Lower Medium Grade

Non-Investment Grade Speculative

SUBINVESTMENT QUALITY Includes grades below the four highest rating categories, unrated debt securities of equivalent quality, and defaulted debt securities

BB

Ba

B

B

Highly Speculative

CCC

Caa

Substantial Risks

Extremely Speculative/ Default Imminent

CC/C

Ca

D

C

In Default