Börsenlexikon: Credit rating

Measure of the creditworthiness of bond issuers. The lower the credit rating assessed by market participants, the higher the interest that must be paid by the issuer as a risk premium. Leading rating agencies such as Standard&Poor's, Moody's and Fitch assign ratings to classify creditworthiness categories.

The ratings used by Standard&Poor's are:

Suitable for investment (investment grade)
AAA = Reliable and stable obligors, highest quality
AA = Good obligors, slightly higher risk than AAA
A = Overall economic situation should be considered
BBB = Medium quality obligors, currently performing satisfactorily

Only suitable for speculative investment purposes (non-investment grade)
BB = Very dependent on overall economic situation
B = Financial situation is notoriously volatile
CCC = Speculative bonds, low income of debtor
CC as CCC
C as CCC
D = In default
NR no rating (NR = Non Rated)
Ratings below BBB are considered junk bonds.