S&P, Moody's, and Fitch are all rating agencies that gather up information about bonds and the companies that issue them. They release ratings about the relative strengths of individual bonds so that investors can make better decisions.
Rating agencies look at things like the financials of a bond issuer, debt loads, and indicators. If a bond is ranked high, there is a low chance of default, meaning that the company or issuer will probably pay you what they're supposed to and you won't lose your money. Lower ratings mean bigger risks.
In the S&P world, BBB is the highest rating for an "investment grade" bond. Anything lower than BBB is considered a junk bond.
Caveat emptor. (That's Latin for "read the fine print.")
Related or Semi-related Video
Finance: What are the Differences in S&P...27 Views
finance a la shmoop what are the differences in S&P's, and Moody's
ratings? capital letters. really that's about it the assessment of the rating
itself is about the same. the people work at both companies all came from about [grinning men walk in front of a school]
the same schools the same semi diversified backgrounds and well they
all eat the same white bread. note the nomenclature differences here though.
Moody's does in fact look kind of moody with a big fat capital letter in the
beginning followed by small letters and slightly different notations. the S&P is
all in caps all shouting all the time. the metrics behind say a quote highly [chart shown]
speculative bond unquote down here are about the same for both companies but
the slight differences are worth noting so that when you see a rating well you
know just by the way in which it's written who wrote it.
now as for actually understanding bond ratings well that's a different story. to [document shown]
most people they might as well be hieroglyphics. [confused woman reads paper]
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