Definition
AA Bond Rating
What is a "AA" bond rating? What does it mean if a bond currently has a AA rating?
There are three major credit rating agencies - Moody's, S&P and Fitch.
For all three agencies, the highest rating that a bond can have is AAA. AAA means that the bond has virtually no chance of a default.
One step below AAA is AA. Now, all three agencies have three different AA levels.
For Moody's, it is: Aa1, Aa2 and Aa3. Aa1 is the best of the three, and is one level below AAA.
For S&P and Fitch, the ratings are: AA+, AA, AA-. As you can probably figure out, AA+ is the best of the three.
Think of it like a grade in school - you can have B+, B and B-.
AA is considered to be a high grade for a bond, but not quite a prime grade (that would be AAA).
While a AAA rating means that a bond has "virtually" no chance of default, a AA rating means that there is a "low" chance of a default.
Companies and countries with AA-rated bonds are in good financial shape, but there is still some room for improvement in the eyes of the credit rating agencies.
For all three agencies, the highest rating that a bond can have is AAA. AAA means that the bond has virtually no chance of a default.
One step below AAA is AA. Now, all three agencies have three different AA levels. For Moody's, it is: Aa1, Aa2 and Aa3. Aa1 is the best of the three, and is one level below AAA.
For S&P and Fitch, the ratings are: AA+, AA, AA-. As you can probably figure out, AA+ is the best of the three.
Think of it like a grade in school - you can have B+, B and B-.
AA is considered to be a high grade for a bond, but not quite a prime grade (that would be AAA).
While a AAA rating means that a bond has "virtually" no chance of default, a AA rating means that there is a "low" chance of a default.
Companies and countries with AA-rated bonds are in good financial shape, but there is still some room for improvement in the eyes of the credit rating agencies.