What is an investment grade bond?

Staci West 21/02/2024 in Fixed income

Shalin Shah, co-manager of the Royal London Corporate Bond fund, explains what an investment grade bond is and the credit ratings necessary to met the criteria.

Watch the full interview with Shalin here.

An investment grade bond is a security which represents us lending to a company and it has a credit rating. Credit ratings are provided by rating agencies, and the rating must be between AAA, which is the highest rating [and] the safest lending, to BBB-. It is a safer way of lending than what we call the high yield market, which is companies which have lower ratings below that BBB-. So, it is a market which is made up of lending to companies that historically have had much lower potential to default, so default on their obligations.

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