Bond ratings are a crucial tool in evaluating the risk associated with investing in bonds. These ratings are assigned by credit rating agencies such as Standard and Poor's Corp, Moody's Investors Services, CRISIL, ICRA, and CARE. These agencies analyze the financial stability of bond issuers, both corporate and government, and assign a rating based on the likelihood of default. Ratings range from AAA or Aaa (indicating extremely low risk of default) to D (currently in default). Bonds rated below BBB by S&P or Baa by Moody's are not considered investment grade. Mutual funds typically have restrictions on purchasing bonds with certain quality ratings, as specified in their prospectuses. Thus, bond ratings play a crucial role in guiding investors towards making informed decisions about their investments.
