Wednesday, December 29, 2010

Investment Grade

Investment grade refers to bonds that have a relatively low risk of default, as indicated by their credit rating. In terms of the Standard & Poor's ratings, the minimum rating to be considered investment grade is BBB. In the case of bond funds, there will usually be an explicit policy on what distribution of credit ratings a fund can hold in its portfolio e.g. no non-rated debt, BBB or better, 75% in A or better, etc. Bonds which fall below the BBB level are regarded lower credit quality and are sometimes referred to as junk bonds.

Synonyms: Investment grade credit rating, Credit rating

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