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A guide to the riskiness of a financial instrument provided by a ratings agency, such as Moody’s, Standard and Poor’s and Fitch IBCA. These measures of credit quality are mostly offered on marketable government and corporate debt. A triple-A or A++ rating represents a low risk of default; a C or D rating an extreme risk of, or actual, default. Debt prices and yields often (but not always) reflect these ratings. A triple-A bond has a low yield. High-yielding bonds, also known as junk bonds, usually have a rating that suggests a high risk of default. A series of financial market crises from the mid-1990s onwards led to growing debate about the reliability of ratings, and whether they were slow to give warning of impending trouble. After the Enron debacle, which again the ratings agencies had failed to predict, some critics argued that the big three agencies had formed a cosy oligopoly and that encouraging more competition was the way to improve ratings.

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