What does a bond rating signify?

A bond rating is an evaluation provided by credit rating agencies that reflects the credit quality of a bond and the likelihood that the issuer will be able to meet its financial obligations, specifically the repayment of the bond's principal and interest. This rating helps investors assess the risk associated with that particular bond.

The scale typically ranges from high-grade ratings (indicating low credit risk) to lower-grade ratings (which indicate greater risk). Investors often use these ratings as a crucial factor in making investment decisions, as higher-rated bonds are generally considered safer and may offer lower yields compared to lower-rated bonds, which carry a higher risk of default.

In contrast, liquidity relates to how easily a bond can be bought or sold in the market, total interest payable describes the bond's cash flow characteristics, and market presence refers to how well-known or established the issuing entity is. While these aspects can influence an investor's decision-making, they do not directly define the bond's credit quality or the issuer's likelihood of fulfilling its payment obligations, which is what the bond rating specifically measures.