what is a aaa credit rating 
aaa is the highest possible rating that may be assigned to an issuer s bonds by any of the major credit rating agencies aaa rated bonds have a high degree of creditworthiness because their issuers are easily able to meet financial commitments and have the lowest risk of default rating agencies standard poor s s p and fitch ratings use the letters aaa to identify bonds with the highest credit quality while moody s uses a slightly different aaa to signify a bond s top tier credit rating understanding aaa credit ratingscredit ratings are assessments or opinions of the creditworthiness of a business or government as such they provide an alert of the likelihood that the subject will live up to their financial obligations by paying their bills investors can use these ratings to decide whether countries and bond offerings are safe investments these ratings are assigned by credit rating agencies notably s p moody s and fitch aaa and aaa ratings are considered to be investment grade since they are perceived to have the lowest risk of default these instruments tend to offer the investors the lowest yields among bonds with similar maturity dates lower risk equals lower return the term default refers to a bond issuer failing to fulfill its obligations namely failing to make semiannual interest payments or repay the principal amount when due aaa ratings are given to government debt and companies corporate bonds the global credit crisis of 2008 resulted in a number of companies losing their aaa rating most notably general electric ge 1 as of august 2023 only two companies held the aaa rating outright microsoft msft and johnson johnson jnj 234 apple aapl is split with an aaa rating by moody s and an aa one notch below aaa from s p 5even the united states suffered a ratings cut by s p to aa in 2011 losing its vaunted aaa status due to political infighting over raising the debt ceiling 6 moody s and fitch maintained the u s at aaa and aaa ratings respectively that is until august 2023 when fitch downgraded the u s s long term ratings from aaa to aa the agency cited potential issues with financial deterioration over the next three years and rising national debt 7rather than restricting their fixed income exposure to aaa rated bonds investors should consider balancing those investments with higher income producing bonds such as high yield corporates types of aaa rated bondsmunicipal bonds can be issued as either revenue bonds or general obligation bonds with each type relying on different sources of income revenue bonds for example are paid using fees and other specific income generating sources like city pools and sporting venues on the other hand general obligation bonds are backed by the issuer s ability to raise capital through levying taxes state bonds rely on state income taxes while local school districts depend on property taxes issuers can sell both secured and unsecured bonds each type of bond carries with it a different risk profile a secured bond means that a specific asset is pledged as collateral for the bond and the creditor has a claim on the asset if the issuer defaults secured bonds may be collateralized with tangible items such as equipment machinery or real estate secured collateralized offerings may have a higher credit rating than unsecured bonds sold by the same issuer conversely unsecured bonds are simply backed by the issuer s promise to pay therefore the credit rating of such instruments relies heavily on the issuer s income sources and business outlook benefits of a aaa ratinga high credit rating lowers the cost of borrowing for the issuer or borrower therefore it stands to reason that companies with high ratings are better positioned to borrow large sums of money than fixed income instruments with lesser credit ratings and a low cost of borrowing affords firms a substantial competitive advantage by letting them easily access credit to grow their businesses for example a business may use the incoming funds from a new bond issue to launch a new product line set up a shop in a new location or acquire a competitor all of these initiatives can help a company increase its market share and thrive over the long haul 