Which risk is most often evaluated through bond ratings?

Bond ratings primarily assess the creditworthiness of a bond issuer, which directly relates to the likelihood of default on the bond. Default risk is essentially the risk that the issuer will be unable to make the required interest payments or repay the principal amount at maturity. Ratings provided by agencies such as Moody’s, Standard & Poor’s, or Fitch reflect their analysis of the issuer's financial stability, payment history, and overall economic conditions that might affect the issuer's ability to meet its debt obligations.

In contrast, liquidity risk pertains to how easily a bond can be bought or sold without significantly affecting its price. Interest rate risk involves the potential for bond prices to decline as interest rates rise, which is influenced by broader economic conditions rather than the issuer's creditworthiness. Market risk relates to the overall fluctuations in the market that can affect investment outcomes but does not specifically pertain to the issuer's financial ability to make payments on a bond. Therefore, bond ratings are focused explicitly on assessing default risk, making this the correct choice.