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Bond rating

A bond rating is the measure of the quality of the bond or fixed income security. Bond ratings are assigned by bond rating agencies including firms such as Standard and Poor's, Moody's, and Fitch. Several rating systems are used, but the most common one ranges from AAA for the safest to C- for the least secure. Investment grade bonds are rated from AAA to BBB-. BB+ and below bonds are considered junk bonds.

Expanded Definition

Rating agencies have websites with extensive information on their ratings systems. Generally an investment grade rating means the issuer has adequate resources to refund the issue at maturity. Junk bond rating indicates insufficient funds to refund the issue. Hence, the assets purchased with the borrowed funds must succeed for the bond to be refunded.

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