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AAA (credit rating)

AAA is the highest possible credit rating assigned to an issuer's bonds by credit rating agencies. It signifies the lowest credit risk and the highest capacity to meet financial commitments, making it a benchmark of the best credit quality.

Example

U.S. Treasury bonds are often rated AAA, representing the safest investment with the lowest risk of default.

Key points

• Represents the highest level of creditworthiness.

• Typically associated with sovereign debt or very large, stable corporations.

• Allows issuers to borrow at the lowest possible interest rates.

Quick Answers to Curious Questions

An investor might choose AAA-rated bonds for the safety and security they offer. These bonds have the lowest risk of default, making them ideal for conservative investors or those prioritizing capital preservation.

An AAA rating allows the issuer to borrow at the lowest interest rates, reducing their cost of capital. It also increases investor confidence, making it easier to raise funds.

Factors could include significant financial stress, increased debt levels, a deteriorating economic environment, or a loss of confidence in the issuer’s ability to meet financial obligations.