Fixed-income instruments and markets are typically categorised along three dimensions: issuer type (often known as sector), credit quality, and time to maturity. Sometimes, instruments and markets are additionally classified by issuers’ geography, currency, and ESG characteristics.
In contrast to equities, where issuers typically issue just one or two instruments, issuers often have many fixed-income instruments outstanding.
A common measure of credit quality is a credit rating. Credit ratings are letter-grade, qualitative measures of an issuer’s ability to meet its debt obligations based on both the probability of default and the expected loss under a default scenario. Credit ratings are given and maintained by credit rating agencies for both short-term and long-term debt and for issuers and specific bond issues.
