What Are Bond Ratings? Definition, Effects, and Agencies

Описание: A bond rating measures the creditworthiness of a bond, which corresponds to the cost of borrowing for an issuer. Independent rating services evaluate a bond issuer's financial strength, or its ability to pay a bond's principal and interest, in a timely fashion. The rating agencies determine a bond's rating, which greatly influences interest rates, investment appetite, and bond pricing. In the 2008 financial crisis, bond rating agencies played a significant role by providing falsely high bond ratings. Bonds with lower ratings have higher yields to entice investors, while investment-grade bonds are considered to be less risky with higher ratings.
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