What is the Difference Between Moody’s and S&P Ratings?

Moody's and S&P (Standard & Poor's) are two of the three major credit rating agencies, along with Fitch. They assess the creditworthiness of countries and private enterprises, providing ratings that help investors understand the risk associated with investing in various debt instruments. Although both agencies use different ratings scales, their ratings generally convey similar information. However, there are some differences between Moody's and S&P ratings:

1. Ratings Scale: Moody's uses a rating scale ranging from Aaa to C, while S&P uses a scale ranging from AAA to D. Both agencies have equivalent rating grades, but Moody's uses "Aaa" and "Aaa" for its highest ratings, while S&P uses "AAA" and "AA+".
2. Rating Methodology: Moody's ratings are based on expected losses, reflecting both the likelihood of default and expected financial losses in the event of default (Loss Given Default). In contrast, S&P ratings are the agency's opinion on the likelihood or probability of default by a corporate or sovereign.
3. Credit Ratings: Moody's tends to assign more conservative ratings compared to S&P. For example, the average rating for Moody's is more than half a notch lower (worse credit quality) than the average S&P rating.
4. Confidential Ratings: Moody's usually provides point-in-time confidential ratings (“indicative ratings”), while S&P maintains confidential credit ratings periodically, similar to a public rating. Public dissemination of a private credit rating is not permitted.

Despite these differences, both Moody's and S&P ratings are widely used by investors, regulators, and analysts to assess the creditworthiness of various debt instruments and issuers.

Comparative Table: Moody’s vs S&P Ratings

The table below shows the difference between Moody's and S&P ratings. The ratings are divided into categories ranging from AAA (best) to D (junk status). Each rating grade is called a notch, and an increase or decrease in a rating typically refers to a change in a notch.

S&P and Fitch have relatively similar rating scales, while Moody's uses a slightly different scale with numbers. The three major credit rating agencies are Standard & Poor's Global Ratings (S&P), Moody's, and Fitch Ratings. They assess the creditworthiness of countries and enterprises based on business risk, financial risk, and management and governance.