Non-Investment-Grade Bonds

Definition:

Bonds given a Credit Rating lower than BBB- by Standard & Poor’s (S&P) or Fitch and Baa2 by Moody’s. These bonds are associated with a higher default risk (as compared to Investment-Grade Bonds), but do, however, offer higher rates of return and can offer Yields of up to four percentage points higher than a safer government issue (often regarded as the safest of Investment-Grade Bonds).

Also commonly known as Speculative Bonds, High Yield Bonds, and Junk Bonds.

See also Ratings Agencies.

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