Moody’s rating system
NZPA-AAP Canberra AAA is the highest-possible rating assigned by Moody’s. Next is AA, then A, BAA, BA, B and so on down to C. Within each alphabetical rating from AA through to B, Moody’s applies numerical modifiers one, two and three. Thus, going from AAA way down to C involves 16 separate downgradings. At AAI, Australia was in company with countries such as Belgium, Denmark and Norway. At AA2, Australia would join Spain, but would still be higher than New Zealand and Ireland which are rated AA3. Latin American debtor countries are rated in the Bs, so there are quite a few steps yet before Australia goes down the Argentinian road. When Moody’s downgraded Australia one notch to AAI in September, 1986, it meant the country was not quite regarded as “gilt-edged,” but still close to
the top of the ratings table. “Bonds, which are rated AA, are judged to be of high quality by all standards,” Moody’s says in its ratings definitions.
“Together with the AAA group, they comprise what are generally known as high grade bonds. “They are rated lower than the best bonds because margins of protection may not be as large as in AAA securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in AAA securities.”
Bonds rated triple-A are judged to be of the highest quality, carrying the smallest degree of investment risk. Interest payments are protected by a large, or exceptionally stable, margin and the principal is secure.
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Press, 30 August 1989, Page 39
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265Moody’s rating system Press, 30 August 1989, Page 39
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