Credit Rating

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Standard and Poor's building

Each bond issue is given a credit rating according to how much investment risk is associated with the bonds – i.e. how likely it is that the issuer will be able to meet interest (coupon) and capital (principal) repayment obligations.

The higher credit ratings (such as AAA) mean that the issuer is highly likely to be able to meet these obligations and thus can offer bonds with lower interest rates and still attract investors.

Bonds with higher ratings are referred to as investment grade, those with lower ratings as non-investment grade (i.e. D to BB+).

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