\nBonds are debt instruments through which a firm raises funds and fulfils its capital requirements. These are issued at a Face value, have a maturity date, a coupon rate and come with credit quality or rating. The credit quality is assigned by external agencies called credit rating agencies, which evaluate the bond on the company\u2019s debt paying capability, in addition to other parameters. Based on the risk, the rating agencies rate or \u2018grade\u2019 the companies and their bonds as \u2018Investment grade\u2019 or \u2018non-investment\u2019 grade. Thus a bond rating is an evaluation of a bond by a specific \u2018rating\u2019 agency engaged in this activity, based on the company\u2019s financial health. This ensures its investors of timely interest payments as well as guaranteed principal repayment.<\/p>\n
Key features of Bond rating are:
\n1. Bonds are assigned ratings in a particular format. For example, \u2018AAA\u2019 to \u2018BBB-\u2019 or \u2018Aaa\u2019 to \u2018Baa3\u2019 to \u2018investment grade\u2019 bonds. Non-investment grade bonds (junk bonds) have ratings ranging from \u2018BB+\u2019 to \u2018D\u2019 (Default) or \u2018Baa1\u2019 to \u2018C\u2019.
\n2. CRISIL, ICRA, CARE, Fitch India are some of the primary rating agencies in India providing bond rating services. These agencies provide rating or \u2018score\u2019 to corporate (or government) bonds.
\n3. Bond rating is done after analyzing and researching the companies on various factors like financial stability, performance, cash flows and growth outlook along with other factors to check their credit worthiness.<\/p>\n
Bonds are debt instruments through which a firm raises funds and fulfils its capital requirements. These are issued at a Face value, have a maturity date, a coupon rate and come with credit quality or rating. The credit quality is assigned by external agencies called credit rating agencies, which evaluate the bond on the company\u2019s […]<\/p>\n","protected":false},"author":67,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[12],"tags":[],"class_list":["post-4143","post","type-post","status-publish","format-standard","hentry","category-mutual-funds"],"_links":{"self":[{"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/posts\/4143","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/users\/67"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/comments?post=4143"}],"version-history":[{"count":0,"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/posts\/4143\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/media?parent=4143"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/categories?post=4143"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/tags?post=4143"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}