In investment, the bond credit rating represents the credit worthiness of corporate or government bonds. The ratings are published by credit rating agencies and used by investment professionals to assess the likelihood the debt will be repaid.
Credit rating is a highly concentrated industry with the two largest rating agencies — Moody's Investors Service, Standard & Poor's — having roughly 80% market share globally, and the "Big Three" credit rating agencies — Moody's, S&P and Fitch Ratings — controlling approximately 95% of the ratings business.
Credit rating agencies registered as such with the SEC are "nationally recognized statistical rating organizations".
The following firms are currently registered as NRSROs: A. Best Company, Inc.; DBRS Ltd.; Egan-Jones Rating Company; Fitch, Inc.; HR Ratings; Japan Credit Rating Agency; LACE Financial Corp.; Moody’s Investors Service, Inc.; Rating and Investment Information, Inc.; Morningstar Credit Ratings, LLC; and Standard & Poor’s Ratings Services.
Under the Credit Rating Agency Reform Act, an NRSRO may be registered with respect to up to five classes of credit ratings: (1) financial institutions, brokers, or dealers; (2) insurance companies; (3) corporate issuers; (4) issuers of asset-backed securities; and (5) issuers of government securities, municipal securities, or securities issued by a foreign government.
The credit rating is a financial indicator to potential investors of debt securities such as bonds.
These are assigned by credit rating agencies such as Moody's, Standard & Poor's and Fitch Ratings to have letter designations (such as AAA, B, CC) which represent the quality of a bond.
Moody's assigns bond credit ratings of Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C, with WR and NR as withdrawn and not rated.
An obligor has STRONG capacity to meet its financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories.
An obligor has ADEQUATE capacity to meet its financial commitments.
However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments.
An obligor is LESS VULNERABLE in the near term than other lower-rated obligors.