What is a Moody's rating?
Moody’s is a leading credit rating agency that awards grades to a country or large corporate borrower indicating the probability of default. The system of rating securities was founded by John Moody in 1909 to provide investors with a simple way of evaluating credit risk.
Where have you heard about Moody's ratings?
If Moody’s changes a country's credit rating, especially if it’s downgraded, it’s usually big news, being taken as a sign that its economic prospects have worsened. Investors also keep a close eye on the ratings that Moody’s assigns to government and corporate bonds.
What you need to know about Moody's ratings.
Moody's is one of the world’s best-known credit rating agencies, along with Standard & Poor's and Fitch. It ranks securities from AAA to C. A top rating means there’s very little chance of default, while anything below a B is considered high risk.
Generally speaking, the higher the rating the less the government or company will have to pay to borrow money.
A bond is considered investment grade if Moody's rates it BAA3 or higher. Changes in ratings occur more frequently among bonds with lower ratings than higher ones.