Investment Grade
Corporate Credit Analysis glossary · Ratings, Syndication & Market Dynamics
Definition
Rating of BBB- (S&P/Fitch) or Baa3 (Moody's) or higher. The threshold separates regulatory and investment-mandate eligibility for many institutional investors, including pension funds and insurance companies.
Investment Grade in plain English
"Investment grade" is a quality stamp that rating agencies put on borrowers they judge fairly safe — specifically a rating of BBB- or Baa3 and above. The reason it's a big deal is that many huge, cautious investors like pension funds and insurance companies are only allowed to buy bonds at or above this line, by law or by their own rules. It's like a restaurant needing an A health-grade to stay open to certain customers: cross below the line into "junk," and a whole class of buyers is forced to walk away, which makes borrowing pricier for the company.
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