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What Is a Bond Level Rating?

What Is a Bond Level Rating? thumbnail
Bond level ratings reflect investment risk.

Bond rating companies assess the investment risk of a bond and give it a bond level or bond credit rating. Investors consider bonds with higher ratings to be less risky than bonds with lower ratings.

  1. Purpose

    • The purpose of assessing a company's bond level rating is to give investors an idea of how risky an investment the bond is. Different types of investment risk factors that affect a company's bond rating such as interest rate, credit and purchasing power risk. Moody's, Standard and Poor's and Fitch are the highest regarded bond rating agencies by investors.

    A and B Level Rated Bonds

    • Bonds rated at the A level are high-grade investments and represent stable companies that have a low risk of credit default. AAA is the highest bond level rating in this category. B bond level ratings represent stable companies that have a slightly higher investment risks than A rated bonds. Generally, bonds receive a B rating if the company poses a higher risk of credit default.

    C Level Rated Bonds

    • C level rated bonds represent companies that are experiencing financial difficulties and pose a very high investment risk. Some companies that have a C level bond rating have already defaulted on their credit obligations.

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