One key characteristic of a bond is that it will almost always require a credit rating. A bond is often issued to investors who may not have the skills and knowledge to fully understand the risks inherent in that investment. A credit rating provides an independent assessment from which the expected return on that investment can be benchmarked.
There are a number of agencies that will publish credit ratings; the most commonly consulted are Fitch, Moody's, and Standard and Poor's (S&P). Each agency will have its own methodologies for measuring risk, which are readily available on their websites. The rating provides a view on the likelihood that the "promise" will be broken-that is, that the issuer will default. A summary of the key rating levels for these three agencies is shown in Table 2.