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Three firms—Fitch Ratings, Moody’s Investors Service, and Standard & Poor’s—rate the municipal bonds issued by school districts, cities, and other public agencies. The higher the rating, the better the financial terms for the issuers.
| Moody’s Ratings | Investment Grade | Fitch’s and Standard & Poor’s Ratings |
|---|---|---|
| Aaa | Bonds are of highest credit quality with the lowest expectation of credit risk. Issuer has extremely strong repayment capacity that is highly unlikely to be hurt by foreseeable events. | AAA |
| Aa | Very high quality, very low credit risk, and very strong capacity for repayment that is not significantly vulnerable to foreseeable events. | AA |
| A | High quality, low credit risk, and strong capacity for repayment, which might be more vulnerable to changes in circumstances or in economic conditions than in the case of higher ratings. | A |
| Baa | Good quailty, low credit risk, with adequate capacity for repayment that could be impaired by adverse changes in circumstances and economic conditions. | BBB |
| Speculative Grade | ||
| Ba | A possibility exists that credit risk will develop, particularly as the result of adverse economic change over time, but business or financial alternatives may be available to allow financial commitments to be met. | BB |
| B | Highly speculative, with significant credit risk and a limited margin of safety. Financial commitments are being met, but capacity for continued payment is contingent upon a sustained favorable business and economic environment. | B |
| Caa | Default is a real possibility, with capacity for meeting financial commitments solely reliant on sustained favorable business or economic conditions. | CCC |
| Ca | Default appears probable. | CC |
| C | Default is imminent. | C |
| Entity has failed to meet payments due on some but not all financial obligations, but continues to repay other obligations. | RD (Fitch) | |
| Bonds are in default. | D |
