A-/A3: Definition, Bond Ratings Scale, Example (2024)

FAQs

What is the A -/ A3 rating? ›

A-/A3 are medium investment grade credit ratings offered by Moody's and Standard & Poor's. Both ratings signify that the issuer has financial backing and some cash reserves with a low risk of default.

Grade descriptors. A 1, 90-100, I: Highly Excellent - Exemplary. A2, 80-89, I: Highly Excellent. A3, 70-79, I: Excellent. B, 60-69, II.i: Very Good.

B3/B- is a credit rating used by Moody's, S&P, and Fitch for an issued debt instrument that are at the bottom end of junk bonds. Moody's uses the B3 rating, while S&P and Fitch use B-. The next step below would be C-rated bonds, which are highly speculative and risky.

A3 (70-79%)

A sharply-focused answer of high intellectual quality.

From there, numbers or symbols further break down the letter-based rating. For example, with S&P and Fitch, a rating of AA+ is better than AA, and a rating of AA- is worse than AA but better than A+. Moody's uses numbers to indicate relative quality, with Aa1 being the best Aa rating, followed by Aa2 and Aa3.

Bond ratings are expressed as letters ranging from “AAA”, which is the highest grade, to “D”, which is the lowest grade. Different rating services use the same letter grades, but use various combinations of upper- and lower-case letters and modifiers to differentiate themselves.

Aaa Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk. Aa Obligations rated Aa are judged to be of high quality and are subject to very low credit risk. A Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.

A standard paper size: At its most fundamental, “A3” is the international term for a sheet of paper 297 millimeters wide and 420 millimeters long.

These are the qualities associated with the grade A3, 70-79, I: Excellent.

Investment-grade refers to bonds rated Baa3/BBB- or better. High-yield (also referred to as "non-investment-grade" or "junk" bonds) pertains to bonds rated Ba1/BB+ and lower.

Are B-rated bonds safe? ›

BBB/Baa is the lowest rating that qualifies for commercial bank investments. It's a borderline group for which, in Standard & Poor's words, adverse economic conditions or changing circ*mstances are more likely to lead to a weakened capacity to pay interest and repay principal than for bonds in higher-rated categories.

Junk bonds, on the other hand, are rated below BBB and carry what is considered the highest risk of a company missing an interest payment (called default risk).

The rating A-/A3 is an affirmation of financial stability and is characterized by a relatively low risk of default. When a company or debt issue receives an A-/A3 rating, it signifies that it holds a solid credit standing in the financial market.

The AA+ rating is issued by S&P and Fitch and is similar to the Aa1 rating issued by Moody's. This rating is still of high quality but it falls below the AAA ranking. It comes with very low credit risk even though long-term risks may affect these investments.

On an issuer-weighted basis, bonds rated A3 have a 0.04% probability of default at the end of year 1, and increases to 0.62% at the end of year 5. This compares to 0.05% and 0.29% for an Aa3-rated corporate name, respectively.

Long-term rating scale

'AA' rated entities and instruments demonstrate very high credit quality with a very low default risk. 'A' rated entities and instruments demonstrate high credit quality with a low default risk. 'BBB' rated entities and instruments demonstrate medium credit quality with a moderate default risk.