Legal Definitions - bond rating

A bond rating is a way to assess the investment value of a bond issue. It is a system used to evaluate and appraise the creditworthiness of a bond issuer and the likelihood of the issuer defaulting on the bond.

For example, a bond rating agency may assign a rating of AAA to a bond issue, indicating that the issuer has a very strong ability to meet its financial obligations. On the other hand, a bond issue with a rating of C may indicate that the issuer is at a high risk of defaulting on the bond.

Bond ratings are important for investors because they provide an indication of the level of risk associated with a particular bond issue. Investors can use bond ratings to make informed decisions about whether to invest in a particular bond issue based on their risk tolerance and investment objectives.