Credit Ratings

Credit Ratings

The difference between AAA and AA or A isn’t really crucial for a lot of investors. But anything below BBB is very speculative. Investors have to pay more attention to Junk-Bond ratings as the risk of loss is higher.


So how High or Low can you go?

The highest level is AAA (or Triple-A), followed by AA, A, BBB, BB, B, with plenty more points all the way down to D (otherwise known as Junk). Each rating agency (Standard & Poor, Moody’s and Fitch) has its own variation, but the higher the letter in the alphabet and the more letters used, the lower the risk is.

AAA means a minimal risk. The US and UK governments pick up AAA or AA (depending on which ratings agency). All the A grades are good, and some of the Bs are seen as acceptable too. However lots of investors will draw the line at BBB.

BB, B are probably still okay, but there are long-term fears over the issuing government or company. They are more likely to be a bit late with cash rather than not make a payment altogether.

CCC, CC, C is for caution. There’s a current problem in the country or company issuing the bonds and a much greater risk of late payments.

DDD, DD, D is for distress and default. The country or company is already in severe trouble, has missed out on making payments to investor and may be heading towards economic or business disaster . D-style bonds are only worthwhile buying if investors are willing to take a massive gamble.

*Please Note, Forex and other forms of trading carry a high level of risk to your capital as you could lose all of your investment. These products may not be suitable for every investor, therefore ensure you understand the risks and seek independent advice. Invest only what you can afford to lose. We are NOT financial advisers and we do NOT offer financial advice.