Split Rating

Split rating

Two different ratings given to the same security by two important rating agencies.

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split rating

A condition that occurs when the same bond is rated differently by the rating agencies. An example is a bond rated AA by one agency and A by another agency. A split rating may occur because one rating agency places a different emphasis on certain variables or because it views a particular item (such as a recent acquisition by the issuer) differently than the other rating agency.

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Split Rating

A situation in which two ratings agencies give a bond two different ratings. Experts disagree as to why ratings agencies may give different ratings, but many point to differences in methodology. They also disagree as to whether the higher or the lower rating affects market prices more. It is important to note, however, that most regulators do not allow banks and some other institutional investors to buy bonds that have not received an investment-grade rating from at least two agencies. Thus, a split rating in which one agency calls a bond investment-grade and another calls it junk can have major implications for issuers and some investors.