What is a bonds credit rating?
Each bond has a credit rating that can be used to determine the financial strength and risks of the issuer of the bond (company or government). There are three main credit rating agencies:
Bond ratings are separated into investment grade and non-investment grade. It’s practically the same as secured vs unsecured bonds. Non-investment grade bonds are very risky and are more prone to default (the issuer has trouble paying their debts) before hitting maturity. An overview of ratings:Source: Fidelity.com
Bonds with a very low rating are called speculative or “high yield” bonds. Be very careful when buying bonds with weak ratings.
Chapters: The Ultimate Investing Guide
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