What are AAA rated bonds?
AAA rated bonds are the highest-rated investment-grade bonds. Indian credit-rating agencies like CRISIL, ICRA, CARE, and India Ratings provide these ratings after assessing the financial and operational health of the bond issuer and the risk of the individual bond. AAA bonds are considered the safest as they have the lowest default risk and indicate the issuer's high creditworthiness. Having the lowest risk of default means there is a very low chance that the bond issuer will be unable to repay the principal and interest. Large and well-established companies with strong financials usually issue AAA bonds In India. Some of the most common issuers of AAA rated bonds are public-sector banks, public-sector undertakings and large private-sector banks and companies.
What do credit ratings of bonds mean?
| SYMBOL | INVESTMENT SAFETY |
| AAA | These are securities with the highest safety as they have the lowest credit risk and highest safety regarding fulfilling financial obligations. |
| AA | These are securities with high safety as they have very low credit risk and very high safety regarding fulfilling financial obligations. |
| A | These are securities with moderate safety as they have low credit risk and high safety regarding fulfilling financial obligations. |
| BBB | These are securities with moderate safety as they have moderate credit risk and high safety regarding fulfilling financial obligations. |
| BB | These are securities with moderate risk regarding fulfilling financial obligations. |
| B | These are securities with high risk regarding fulfilling financial obligations. |
| C | These are securities with high risk regarding fulfilling financial obligations. |
| D | Securities with this rating are in default or are expected to be in default so |
*Ratings for AA to C may include modifiers, such as "+" or "-", to indicate the relative standing within the category. For example, a rating of CRISIL AA+ would indicate a stronger standing than a CRISIL AA. Similarly, a CRISIL AA bond will have a lower default risk than CRISIL AA- bond.
What is AAA bond yield?
High-risk high return and vice versa is a fundamental concept of investment returns. As you know, AAA rated bonds have very low risk, so their returns are also relatively low. If, as an investor, you are looking for investment options that provide capital protection and fixed income, you can consider investing in AAA rated bonds.
What are the benefits of AAA rated Bonds?
Since AAA bonds are a safe investment product, they come with the virtue of providing capital preservation. As a result, it is a good investment choice for risk-averse investors who want fixed returns with lowest risk.
Conclusion
AAA rated bonds offer a reliable investment avenue characterised by regular income, stability, and diversification benefits. Issuers with good financial health and robust management practices back these bonds. You can invest in AAA rated bonds if you are looking for safe investment products.
