What Is Aa2?

Aa2 is the third-highest long-term credit rating that ratings agency Moody’s assigns to fixed-income securities, like bonds, that are of high quality with very low credit risk.

Key Takeaways

  • Aa2 is the third-highest long-term credit rating that Moody’s assigns to high-quality fixed-income securities with very low credit risk.
  • The letters, "Aa" in this case, represent the generic rating classification, while the number, "2" in this case, refers to the standing within this classification.
  • In the Moody's scale, Aa2 is just below Aaa and Aa1, but is above everything else.

Understanding Aa2

The letters "Aa" is the generic rating classification and the number, in this case "2," refers to the standing within this class. According to Moody's, "Aa" signifies that the fixed income obligation is "judged to be of high quality and are subject to very low credit risk." The number "2" places the obligation in the middle of the range of that rating class.

The credit ratings assigned by the various ratings agencies, like Standard & Poor's, Moody’s, and Fitch Ratings, measure the probability that the borrower may default. They are based primarily upon the insurer's or issuer's creditworthiness. Essentially, the higher the rating, the more likely the issuer is to meet their financial commitments and the lower the risk of default.

Moody's ratings, for example, start "Aaa" for prime bond issuers with the lowest risk and go down to "C," which is usually given to securities that are in default with little chance of the principal or interest being repaid. Aa2 is just below Aaa and Aa1, but is above everything else.

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  1. Moody's. "Rating Symbols and Definitions." Accessed Dec. 10, 2020.

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