What Is Investment Grade?
An investment grade is a rating that signifies a municipal or corporate bond presents a relatively low risk of default. Bond rating firms like Standard & Poor’s (S&P), Moody’s, and Fitch use different designations, consisting of the upper- and lower-case letters “A” and “B,” to identify a bond’s credit quality rating.
“AAA” and “AA” (high credit quality) and “A” and “BBB” (medium credit quality) are considered investment grade. Credit ratings for bonds below these designations (“BB,” “B,” “CCC,” etc.) are considered low credit quality and are commonly referred to as junk bonds.
Key Takeaways
- An investment grade rating signals that a corporate or municipal bond has a relatively low risk of default.
- Different bond rating agencies have different rating symbols to signify investment grade bonds.
- Investors and analysts commonly look at grades from rating agencies like Standard & Poor’s, Moody’s, and…
