credit rating

A letter-grade assessment of a bond issuer's ability to meet its debt obligations, assigned by rating agencies such as Moody's, S&P, Fitch and KBRA. Bonds rated BBB/Baa and above are investment grade; those rated BB/Ba and below are high yield (“junk”). Credit spread is the difference in yield between a better- and lower-rated bond required by investors as compensation for the increased risk of not receiving interest and principal payments as expected. Spreads widen during periods of stress and compress when conditions are stable.