For corporate-bond and municipal-bond funds, the credit analysis depicts the quality of bonds in the fund's portfolio. The analysis reveals the percentage of fixed-income securities that fall within each credit-quality rating as assigned by Standard & Poor's or Moody's.
At the top of the ratings are AAA bonds. U.S. government bonds are also included within the AAA category (effective 6/30/06). Bonds with a B rating are the lowest bonds that are still considered to be of investment grade. Bonds that are rated lower than B (often called junk bonds or high-yield bonds) are considered to be quite speculative. Any bonds that appear in the NR/NA category are either not rated by Standard & Poor's or Moody's, or do not currently have a rating available.
Benefits
Like the style box, the credit analysis can help the reader determine whether or not a fund's portfolio meets a desired standard or quality. It can also shed light on the management strategy of the fund. If the fund holds a large percentage of assets in lower-quality issues, for example, then the fund follows a more aggressive style and is probably more concerned with yield than credit quality.