Risk rating is key to all investments. While bonds are widely and rightly believed to carry less risk than, for instance, stocks, the rating of the risk of the bond issuer’s default is crucial for many reasons. The most popular agencies which public risk ratings are: Moody’s, Standard&Poor’s, Fitch. Polish regulations do not require mandatory risk rating of bonds except for bonds introduced to foreign markets. However, ratings give the issuer more credibility and prestige. Before instruments are rated, the agency performs an in-depth analysis of the issuer’s financial standing and outlook as well as all risk factors. This impacts the cost of capital raised by the issuer: the selling price of the bonds or their interest rate. Securities of a higher rating usually yield less interest or are sold at higher prices according to the overarching principle of the capital market: less risk means less gain. Ratings reflect the issuer’s credit risk using standard symbols. Ratings are assigned at the time of a bond issue and are reviewed until their maturity.

Ratings assigned by rating agencies and their interpretation