In the first article in our Bond Investment Guide series “What are Bonds?” you’ve learned what bonds are, how they differ from stocks, and some jargons associated with bond investing.
Here in Part 2, you will learn how you can make money from bonds.
Credit Ratings by S&P, Moody’s, and Fitch Ratings
What are Credit Ratings?
Credit Ratings are a measure of the credit worthiness of an organization such as a government or a public or private corporation. It is also an assessment of the quality of debt (loan) instruments issued by these institutions. In layman’s terms, a credit rating is a score that shows the capacity of the borrowing entity to meet its financial obligations to investors.
Who are the major credit rating agencies in the world?
There are several credit rating agencies but the three major players in the world, accounting for at least 90% of the market, are Moody’s, Standard and Poor’s (S&P) and Fitch Ratings. Moody’s and S&P are based in the United States while Fitch Ratings has two headquarters, one in London and another in New York. The “Big Three” issue short-term and long-term ratings of debt papers of governments and companies worldwide and also an outlook on the assessed entity, such as positive, negative or stable.
How are credit ratings useful?
Bond Investing Guide: Types of Bonds
You’re almost ready to make your first investment in bonds. In Part 1 of this series, you learned what bonds are; in Part 2, you … Read More