Bond Ratings: Explained | The Motley Fool

A bond's rating can say a lot about a particular security and its investment risk level.

By Robin Hartill, CFP – Updated Aug 12, 2025 at 2:48 PM | Fact-checked by Parker Hicks

Key Points

Bond ratings indicate a bond's credit quality, helping investors assess repayment reliability.
Investment-grade bonds are low risk with lower interest; speculative grades are higher risk but higher interest.
Ratings by S&P, Moody's, and Fitch guide investors on credit quality.

A bond's rating can tell you a lot using only a few letters or symbols. Let's explore what bond ratings are, the three chief agencies responsible for coming up with bond ratings, and how a bond's rating is determined. We will also answer what the difference is between investment-grade and junk bond securities.

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The word Bond on an old document. — Image source: Getty Images.

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Table by author.
	Moody's	Standard & Poor's	Fitch Ratings
Investment Grade (Lowest Risk)	Aaa	AAA	AAA
Investment Grade	Aa1	AA+	AA+
Investment Grade	Aa2	AA	AA
Investment Grade	Aa3	AA-	AA-
Investment Grade	A1	A+	A+
Investment Grade	A2	A	A
Investment Grade	A3	A-	A-
Investment Grade	Baa1	BBB+	BBB+
Investment Grade	Baa2	BBB	BBB
Investment Grade	Baa3	BBB-	BBB-
Speculative Grade	Ba1	BB+	BB+
Speculative Grade	Ba2	BB	BB
Speculative Grade	Ba3	BB-	BB-
Speculative Grade	B1	B+	B+
Speculative Grade	B2	B	B
Speculative Grade	B3	B-	B-
Speculative Grade	Caa1	CCC+	CCC+
Speculative Grade	Caa2	CCC	CCC
Speculative Grade	Caa3	CCC-	CCC-
Speculative Grade	Ca	CC	CC
Speculative Grade	Ca	C	C
Speculative Grade (Highest Risk)	C	D	D

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How to Calculate Semi-Annual Bond Yield

Navigating bond investments: Importance of current yield, simple semi-annual calculations, and refining for gains/losses.

Understanding Treasury Bonds and Other Investments

Issued by the U.S. government to raise money, T-bonds should have a place in your portfolio.

How to Calculate Yield for a Callable Bond

If your bonds are callable, you need to know how the potential call affects your yield.

How and When to Sell Bonds

Find out when selling bonds is a good idea and how to cash in yours.

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The bottom line on bond ratings

Rating agencies attempt to consolidate a company's financial health into a letter rating, which is quite useful for investors. The investing public is unquestionably better off having independent organizations perform deep analyses for potential bond buyers.

To some investors, bond ratings may feel oversimplified. However, even though bond ratings aren't ironclad guarantees of investment success, they're a great place to start when researching a company's debt. Before purchasing bonds of any quality, be sure that you understand what you're buying and how they fit into your overall financial picture.

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About the Author

Robin Hartill, CFP, is a contributing writer at The Motley Fool. Robin’s work has also been published by Yahoo Finance, USA Today, and Penny Hoarder. She is a graduate of the University of Florida.

TMFRobinHartill

Robin Hartill has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Moody's. The Motley Fool has a disclosure policy.