How are bond ratings established

A bond rating is a grade given to a bond that shows its credit quality. These ratings are done by independent entities. The rating indicates the issuers financial strength and their ability to pay the bond's principal and interest in a timely fashion.

A bond rating is a grade given to bonds that indicates their credit quality. Independent rating services such as Standard & Poor's and Moody's provide these evaluations of a bond issuer's financial strength, or its ability to pay a bond's principal and interest in a timely fashion.