Investment Grade
A bond rating of BBB−/Baa3 or above, indicating low default risk.
What is Investment Grade?
Investment grade refers to bonds rated BBB− or higher by S&P/Fitch, or Baa3 or higher by Moody's. These ratings indicate that the issuer has strong capacity to meet debt obligations, making the bonds suitable for conservative institutional investors including pension funds, insurance companies, and money market funds — many of which are legally restricted to investment-grade holdings. Investment-grade bonds typically offer lower yields than high-yield bonds as compensation for their lower default risk. US Treasuries, most corporate blue chips, and highly rated municipal bonds are investment grade.
Example
Apple Inc. (AAPL) holds an AA+ rating from S&P, reflecting its massive cash position and earnings power. This rating allows Apple to issue debt at very low spreads over US Treasuries.
Source: S&P Global Ratings