Bond Rating

Bond rating is an assessment of a borrower’s ability to repay a loan, specifically for bonds, which are investment loans issued by entities like governments or companies. Rating agencies assign ratings (such as AAA or BBB) based on the issuer’s financial stability and creditworthiness. A higher rating indicates a lower risk of default and usually means the bond will have a lower interest rate. Conversely, a lower rating suggests higher risk and typically results in a higher interest rate to attract investors. Bond ratings help investors evaluate the safety and risk associated with different bonds before investing.