Back to Glossary
Investment grade refers to bonds or other debt instruments that are considered to have a low risk of default by credit rating agencies.
In Depth
Bonds rated as investment grade are issued by financially stable companies or governments, making them a safer bet for investors. These bonds typically have lower interest rates compared to higher-risk bonds because the likelihood of the issuer failing to repay the debt is small. They are often preferred by institutional investors and those seeking stable, lower-risk returns for their portfolios. Credit rating agencies like Standard & Poor's, Moody's, and Fitch assign these ratings.
Example
A bond issued by the U.S. government is considered investment grade due to its extremely low risk of default.