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Average Credit Quality

What is average credit quality?

Average credit quality gives a snapshot of a fixed-income portfolio’s overall credit quality. It is an average of each bond’s credit rating, adjusted for its relative weighting in the portfolio.

Information used to assess average credit quality is provided by the asset-management company. For the purpose of Morningstar's calculations, U.S. government bonds are considered AAA. Municipal bonds at BBB or below are considered high yield, and nonrated municipal bonds are classified as BBB. Morningstar uses this breakdown to calculate the average credit quality.