Standard and Poor’s (S&P) rates the creditworthiness of thousands of corporate and governmental bond issuers as does Moody’s and Fitch. Credit ratings, ratings outlooks and ratings changes are a huge influence on bond prices. It is important to recognize that credit ratings represent only the opinion of the issuing rating agency and that those opinions can sometimes prove to be wrong.
To learn more more about the meaning of a given rating (AAA, AA , A, BBB, etc.) download S&P’s Ratings Definitions Report. It is worthwhile reading for any fixed income investor. In combination with credit ratings, you should consider relative credit spreads before you invest in a bond. The chart and table below show the yields available on Bloomberg Composite U.S. “A” Rated Financial Bonds in comparison to AA+ rated U.S. Treasury securities as of August 8, 2014.
Yield Curves and Spreads “AA+” rated US Treasuries and “A” rated Financials August 8, 2014