Investment Grade

A credit rating given to a government or corporate bond which indicates that the agency giving the rating (Standard & Poor’s, Moody’s or Fitch) thinks the issuer has strong creditworthiness.

The grades used by two of the leading agencies are as follows:

Moody’s Aaa / S&P; AAA
The highest-quality, lowest-risk bonds

Moody’s Aa / S&P; AA
High-quality debt obligations with minimal repayment risk

Moody’s A / S&P; A
Quality bonds with a strong capacity to pay interest and principal which are somewhat susceptible to adverse economic conditions

Moody’s Baa / S&P; BBB
Quality bonds with an adequate capacity to pay interest and principal which are more vulnerable to adverse economic conditions bonds

Moody’s Ba / S&P; BB
Medium-grade bonds with few desirable characteristics

Moody’s B / S&P; B
Speculative bonds with a major degree of risk in adverse economic conditions

Moody’s Caa / S&P; CCC
Issuers in poor standing

Moody’s Ca / S&P; CC
Issuers may be in default

Moody’s C / S&P; C
Income bonds on which no interest is being paid

S&P; D
Bonds in default

All those at Baa/BBB or above are adjudged ‘investment grade’.

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