Standard & Poor’s Global Ratings, Moody’s, and Fitch Ratings are the three major bond rating organizations in the United States. Each has a distinct letter-based grading system to swiftly communicate to investors whether a bond has a low or high default risk, as well as whether the issuer is financially sound. Standard & Poor’s highest rating is AAA, and if a bond drops to BB+, it is no longer deemed investment grade. The lowest grade, D, denotes a bond that has defaulted. This indicates that the issuer has fallen behind on interest and principal payments to its bondholders.
What two companies issue bond ratings?
Moody’s, Standard & Poor’s (S&P), and Fitch are the three agencies. Credit ratings are assigned by agencies to issuers of debt obligations, or bonds, as well as specific financial instruments issued by those entities. Companies, charitable foundations, and governments can all be debt issuers.
What are the names of the three major bond rating agencies?
The Big Three Consulting Firms
- The worldwide credit rating industry is highly consolidated, with only three firms— Moody’s, Standard & Poor’s, and Fitch—controlling nearly all of it.
Why do firms provide a rating to their bonds?
The bond grading procedure is crucial since it informs investors about the bond’s quality and stability. That is to say, the credit rating has a significant impact on interest rates, investment appetite, and bond price. Furthermore, ratings are assigned by independent rating agencies based on future expectations and prognosis.
What are the bond ratings from Moody’s?
Moody’s Investors Service, or just Moody’s, is Moody’s Corporation’s bond credit rating business. It is the company’s traditional line of business and its original moniker. Moody’s Investors Service is a global financial research firm that specializes in commercial and government bonds. Moody’s is one of the Big Three credit rating firms, along with Standard & Poor’s and Fitch Group. It’s also on the list of Fortune 500 companies for 2021.
The organization uses a standardized ratings scale to rate borrowers’ creditworthiness, which measures potential investment loss in the case of default. Moody’s Investors Service assigns ratings to debt securities in a variety of bond markets. Government, municipal, and corporate bonds; managed investments such as money market funds and fixed-income funds; financial institutions such as banks and non-bank finance firms; and structured finance asset classes are all examples. Securities are rated from Aaa to C in Moody’s Investors Service’s ratings system, with Aaa being the highest quality and C being the lowest.
John Moody created Moody’s in 1909 to produce statistics manuals for equities and bonds, as well as bond ratings. The US Securities and Exchange Commission designated the company as a Nationally Recognized Statistical Rating Organization (NRSRO) in 1975. Moody’s Investors Service established a distinct corporation in 2000 after decades of ownership by Dun & Bradstreet. The holding firm Moody’s Corporation was founded.
What does the A3 rating from Moody’s mean?
Moody’s and Standard & Poor’s both have A-/A3 medium investment grade credit ratings. Both ratings indicate that the issuer has sufficient financial resources and cash reserves, as well as a minimal risk of default. A-/A3 is the seventh highest credit rating a debt issuer can get, and it’s four notches above the junk bond cutoff.
What is the rate on corporate bonds?
A corporate bond is a sort of financial product that is sold to investors by a company. The company receives the funds it requires, and the investor receives a certain number of interest payments at either a fixed or variable rate.
What are Moody’s and Standard & Poor’s?
S&P Global Ratings (S&P), Moody’s, and Fitch Group are the Big Three credit rating agencies. S&P and Moody’s are based in the United States, whereas Fitch has offices in both New York City and London and is owned by Hearst. As of 2013, they had a global market share of “about 95 percent,” with Moody’s and Standard & Poor’s each accounting for around 40 percent, and Fitch accounting for about 15 percent.
“Their special status has been solidified by law – at first only in the United States, but then also in Europe,” according to a Deutsche Welle analysis. The Big Three were the only “Nationally Recognized Statistical Rating Organizations (NRSROs)” in the United States from the mid-1990s to early 2003, a classification that meant they were used by the US government in a variety of regulatory sectors. (In the 1990s, Fitch amalgamated with four other NRSROs.)
The credit rating market in Asia is quite diversified. The Big 3’s penetration into the domestic market, particularly in China, is considered less competitive than that of local well-known agencies such as China Chengxin International (CCXI), China Lianhe Credit Rating (Lianhe Ratings), New Century Zixin Assessment Investment Service, Pengyuan Credit Rating, and others, due to regulations imposed by the Chinese central government.