Bonds & rates
Investment grade
Debt rated BBB− or better, considered to have a relatively low risk of default.
How it works
The category exists largely because regulation and investment mandates are written around it. Insurance companies, pension funds and many bond funds are restricted to it.
Yields are correspondingly lower, and price behaviour is driven more by interest rates than by credit conditions.
Related terms
- Credit ratingAn agency’s assessment of how likely a borrower is to repay, on a lettered scale.
- High-yield bondDebt rated below investment grade, paying more because default risk is materially higher.
- Credit spreadThe extra yield a corporate bond pays over a government bond of the same maturity.
- Fallen angelA bond downgraded from investment grade to high yield.
More in Bonds & rates
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.