Dictionary
Financial Glossary
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 Rating
1. An evaluation of a corporate or municipal bond"s relative safety from an investment standpoint. Basically, it scrutinizes the issuer"s ability to repay principal and make interest payments.
The classification of the quality of bonds by various rating services.A bond is basically an IOU - a promise to pay back your original investment at a later date, plus interest payments at regular intervals between now and then. Like all IOUs, its credit-worthiness depends on the borrower. There are broadly three types of borrowers:Governments of leading nationsThese can be relied on to honour their obligations to bondholders. The UK government has never defaulted, i.e. failed to pay interest or principal, on its bonds. These are known as gilts, from the old days when gilt-edged certificates were issued. Your pension fund has to buy these to guarantee they will be able to pay you an annuity when you retire.CompaniesThese are always regarded as more risky than gilts, because companies sometimes default. But obviously, the stronger they are financially, the less likely this is. Rating agencies like Moodys and Standard & Poors give ratings to bonds, so you can tell how risky the market thinks they are. AAA is the safest category. Anything in the B category or below would be too risky for the average investor.Governments of developing nationsThese have proved to be very unreliable in the past. For example, Russia, Mexico and Brazil are all previous defaulters. Investing in this type of bond is strictly for risk-takers.For information on the credit rating services of Moodys, S&P and Fitch IBCA, see "bond rating".
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Glossary 
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Rating - 1. An evaluation of a corporate or municipal bond"s relative safety from an investment standpoint. Basically, it scrutinizes the issuer"s ability to repay principal and make interest payments.
The classification of the quality of bonds by various rating services.A bond is basically an IOU - a promise to pay back your original investment at a later date, plus interest payments at regular intervals between now and then. Like all IOUs, its credit-worthiness depends on the borrower. There are broadly three types of borrowers:Governments of leading nationsThese can be relied on to honour their obligations to bondholders. The UK government has never defaulted, i.e. failed to pay interest or principal, on its bonds. These are known as gilts, from the old days when gilt-edged certificates were issued. Your pension fund has to buy these to guarantee they will be able to pay you an annuity when you retire.CompaniesThese are always regarded as more risky than gilts, because companies sometimes default. But obviously, the stronger they are financially, the less likely this is. Rating agencies like Moodys and Standard & Poors give ratings to bonds, so you can tell how risky the market thinks they are. AAA is the safest category. Anything in the B category or below would be too risky for the average investor.Governments of developing nationsThese have proved to be very unreliable in the past. For example, Russia, Mexico and Brazil are all previous defaulters. Investing in this type of bond is strictly for risk-takers.For information on the credit rating services of Moodys, S&P and Fitch IBCA, see "bond rating".
Rating : 1. an evaluation of a corporate or municipal bond"s relative safety from an investment standpoint. basically, it scrutinizes the issuer"s ability to repay principal and make interest payments.
the classification of the quality of bonds by various rating services.a bond is basically an iou - a promise to pay back your original investment at a later date, plus interest payments at regular intervals between now and then. like all ious, its credit-worthiness depends on the borrower. there are broadly three types of borrowers:governments of leading nationsthese can be relied on to honour their obligations to bondholders. the uk government has never defaulted, i.e. failed to pay interest or principal, on its bonds. these are known as gilts, from the old days when gilt-edged certificates were issued. your pension fund has to buy these to guarantee they will be able to pay you an annuity when you retire.companiesthese are always regarded as more risky than gilts, because companies sometimes default. but obviously, the stronger they are financially, the less likely this is. rating agencies like moodys and standard & poors give ratings to bonds, so you can tell how risky the market thinks they are. aaa is the safest category. anything in the b category or below would be too risky for the average investor.governments of developing nationsthese have proved to be very unreliable in the past. for example, russia, mexico and brazil are all previous defaulters. investing in this type of bond is strictly for risk-takers.for information on the credit rating services of moodys, s&p and fitch ibca, see "bond rating".
