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A credit rating is an independent assessment of the creditworthiness of a bond (note or any security of indebtedness) by a credit rating agency. It measures the probability of the timely repayment of principal and interest of a bond. Generally, a higher credit rating would lead to a more favorable effect on the marketability of a bond. The credit rating symbols (long-term) are generally assigned with "triple A" as the highest and "triple B" (or Baa) as the lowest in investment grade (See below for definition of rating grades). Anything below triple B is commonly known as a "junk bond."
- Bonds rated AAA have the highest ratings assigned by rating agencies. They carry the smallest degree of investment risk. Issuer's capacity to pay interest and principal is extremely strong.
- Bonds rated AA are judged to be of high quality by all standards. They differ from the highest rated (AAA) bonds only in a small degree. Issuer's capacity to pay interest and principal is very strong.
- Bonds rated A have strong capacity to pay interest and repay principal although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than bonds in higher rated categories.
- Bonds rated (BBB) are considered medium grade obligations. They are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or unreliable over any length of time. These bonds lack outstanding important characteristics and have speculative characteristics as well.
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Established rating agencies are for example Standard&Poors or Moodys.
It should be noted that the credit rating of a bond tells you nothing about the probability of losing money from changes, especially declines, in the bond's market value. A bond may not actually default but if many investors are concerned that it might then it's market value will decline sharply. This will bring substantial unrealised losses for those who still hold the bond. Many of these holders will now be sufficiently alarmed about the default risk inherent in continuing to hold the bond that they will sell, sometimes at almost any price, thus crystallising their losses. For more see the Corporate Bonds blog at www.davidandgoliathworld.com
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What does credit sensitive mean in bond investing?
Credit sensitive in bond investing refers to the extent to which a bond's price and yield are influenced by changes in the credit quality of the issuer. Bonds that are considered credit sensitive typically have higher yields to compensate investors for the risk of default or deteriorating creditworthiness. These bonds may include corporate bonds or lower-rated government bonds, where changes in the issuer's financial health can lead to significant fluctuations in their market value. Investors in credit sensitive bonds need to closely monitor credit ratings and economic conditions to assess potential risks and returns.
What will happen to ford motor credit bonds?
Ford motor credit bonds are quotes are enclosed. You can compare the Ford yields, ratings and maturities to other corporate bonds to make a more informed decision. http://investment-income.net/rates/high-yield-bonds-rate-page
What are the key differences between JNK and HYG?
The key differences between JNK and HYG are that JNK is an exchange-traded fund (ETF) that focuses on high-yield corporate bonds with lower credit ratings, while HYG is also an ETF but it tracks a broader range of high-yield corporate bonds with higher credit ratings.
What do secured credit cards mean?
A secured credit card is a credit card for people with poor credit ratings that must deposit the desired amount on money before using the card. The card is similar to a pre-paid credit card that allows credit ratings to get better.
What are the cheapest bonds available for purchase on the market?
The cheapest bonds available for purchase on the market are typically government bonds issued by countries with lower credit ratings or corporate bonds from companies with higher risk profiles. These bonds are considered riskier investments and usually offer higher yields to compensate for the increased risk.
What does credit sensitive mean in bond investing?
Credit sensitive in bond investing refers to the extent to which a bond's price and yield are influenced by changes in the credit quality of the issuer. Bonds that are considered credit sensitive typically have higher yields to compensate investors for the risk of default or deteriorating creditworthiness. These bonds may include corporate bonds or lower-rated government bonds, where changes in the issuer's financial health can lead to significant fluctuations in their market value. Investors in credit sensitive bonds need to closely monitor credit ratings and economic conditions to assess potential risks and returns.
What are two companies rate and publish bonds?
Two companies that rate and publish bonds are Moody's Investors Service and Standard & Poor's. These companies provide credit ratings for bonds to help investors assess the credit risk associated with investing in them.
What will happen to ford motor credit bonds?
Ford motor credit bonds are quotes are enclosed. You can compare the Ford yields, ratings and maturities to other corporate bonds to make a more informed decision. http://investment-income.net/rates/high-yield-bonds-rate-page
What does standards and poor ratings mean?
Standard & Poor's is a business credit rating service. The better your S&P rating is, the lower the interest rate you'll have to pay on any bonds you issue.
Are government bonds safe?
Usually they are safer than other forms of investment, because the government can always raise taxes to repay its debts. However, some governments have defaulted on their debts in the past, so they are not totally safe. You can tell which government bonds are safer than others by their credit rating. Australia and Singapore have AAA credit ratings (the best there is), but other governments like Greece and Portugal have much lower credit ratings and their bonds are not as safe.
What kind of bond has the highest risk of default?
High-yield (junk) bonds have the highest risk of default. These bonds are issued by companies with lower credit ratings and are more likely to default compared to investment-grade bonds.
What are bond ratings?
Bond ratings are grades with are given to bonds indicating their credit quality. They are mostly provided by private independend rating services such as Standard & Poor's, Moody's and Fitch.
What is exceptionally risks bonds?
Exceptionally risky bonds refer to bonds that have a high risk of default due to the financial distress or poor creditworthiness of the issuer. These bonds often have low credit ratings from credit rating agencies, indicating a higher likelihood of default. Investors who choose to invest in exceptionally risky bonds typically demand higher returns to compensate for the increased risk.
What are the key differences between JNK and HYG?
The key differences between JNK and HYG are that JNK is an exchange-traded fund (ETF) that focuses on high-yield corporate bonds with lower credit ratings, while HYG is also an ETF but it tracks a broader range of high-yield corporate bonds with higher credit ratings.
What do secured credit cards mean?
A secured credit card is a credit card for people with poor credit ratings that must deposit the desired amount on money before using the card. The card is similar to a pre-paid credit card that allows credit ratings to get better.
What exactly are bond ratings?
Bond ratings are grades with are given to bonds indicating their credit quality. They are mostly provided by private independend rating services such as Standard & Poor's, Moody's and Fitch.
What are the cheapest bonds available for purchase on the market?
The cheapest bonds available for purchase on the market are typically government bonds issued by countries with lower credit ratings or corporate bonds from companies with higher risk profiles. These bonds are considered riskier investments and usually offer higher yields to compensate for the increased risk.
