Corporate and Municipal bonds are debt obligations of specific corporations or municipalities so there is potentially some risk involved in lending them money. Researching these bonds and their risk is a full time job and probably beyond the means of the individual investor. Luckily there are rating services that provide in-depth analysis of the issuer's financial situation, economic and debt characteristics as well as the specific revenue sources securing the bond.

Bond Screener uses the two most well known services to provide you with a rating for each bond. These are Moody's Investors Service and Standard & Poors (S&P). Below is a chart that shows a scale of ratings assigned to bonds by these services going from the best quality to the lowest.

In addition to the ratings listed above, Moody's adds a "1" to indicate a slightly higher credit quality; for instance, a rating of "A1" is slightly higher than a rating of "A" whereas "A3" is slightly lower. S&P ratings may be modified by the addition of a "+" or "-" (plus or minus). "A+" being slightly higher grade than "A" and "A-" being slightly lower.

Occasionally you may see some bonds with an "NR" in either Moody's or S&P. This means Not Rated and does not necessarily mean that the bonds are of low quality. It basically means that the issuer did not apply to either Moody's or S&P for a rating. Bond Screener will only show you bonds that have an "NR" rating if the other rating agency has given the bond a rating within the range selected below. Government agencies are a good example of very high quality bonds that are not rated by Standard and Poors (S&P).

All other things being equal, the lower the rating, the higher the yield you can expect.

1. Insured

   Insured bonds have the highest degree of safety of all non-government bonds. Bond Insurance agencies guarantee the payment of principal and interest on the bonds they have insured. When bonds are insured by one of the major insurance agencies, they automatically attain a "AAA" rating, identifying the bond as one of the highest quality you can buy. Some of the major bond insurers are AMBAC, MBIA, FGIC and FSA.

2. Very high quality (AA or AAA)

   Bonds in this category are rated by either Moody's or S&P as having very high to the highest quality rating a bond can get. "AAA" bonds are the best quality with the smallest risk of default. Issuers of "AAA" bonds are stable and dependable. "AA" bonds have a slightly higher degree of long term risk, but are still considered safe from default.

3. High Quality (A or AA)

   "A" rated bonds are considered good quality bonds but may be vulnerable to changing economic conditions.

4. Minimum Investment grade (BAA or A)

   BAA (or BBB for S&P) rated bonds are the lowest for investment grade. They are considered satisfactory but should be monitored for longer-term investments.