Investment grade refers to bonds or other debt securities that are rated as relatively low risk by credit rating agencies. These ratings—typically BBB- or higher by S&P, or Baa3 or higher by Moody’s—indicate that the issuer has a strong capacity to meet its financial obligations. Investment-grade securities are favored by conservative investors, pension funds, and institutional buyers because they offer lower default risk compared to high-yield or “junk” bonds. While yields are typically lower, the trade-off is greater stability and creditworthiness.
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