The bond quality rating systems of the two major services are similar, but not identical. Both services also make distinctions within categories
Aa/AA and lower. Moody's uses a numerical system (1,2,3,) and Standard & Poor's uses a + or -.
Investment-grade generally refers to any bonds rated Baa or higher by Moody's, or BBB or higher by Standard & Poor's. Junk bonds are the lowest-rated corporate and municipal bonds — meaning there's a greater-than-average chance that the issuer will fail to repay its debt. But investors may be willing to take the risk of buying these low-rated bonds because the yields are often much higher than on other, safer investments. However, the prices are volatile as well, exposing investors to additional risk if they have to sell before maturity.
Moody's
S&P's
Meaning
Aaa.
AAA
Best quality, with the smallest risk. Issuers exceptionally stable and dependable
Aa
AA
High quality, with slightly higher degree of long-term risk
A
A
High-medium quality, with many strong attributes but somewhat vulnerable to changing economic conditions
Baa
BBB
Medium quality, currently adequate but perhaps unreliable over long term
Ba
BB
Some speculative element, with moderate security but not well safeguarded
B
B
Able to pay now but at risk of default in the future
Caa
CCC
Poor quality, clear danger of default
Ca
CC
Highly speculative quality, often in default
C
C
Lowest-rated, poor prospects of repayment though may still be paying
