Investment grade
Definition · Level 7 · Futures, rates & macro
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Ratings of BBB− or better at S&P/Fitch, Baa3 or better at Moody’s: issuers judged relatively unlikely to default. Many funds may only hold this tier.
Example
Cut from BBB− to BB+ = a “fallen angel”, often met by selling from IG-only mandates.
Rules and market figures change: check the current ones before relying on this.
Where Tradecraft teaches it
Level 7 · Futures, rates & macro, in the lesson “Bonds: price, yield & credit”: Par, coupon, YTM, the price–yield seesaw, the Treasury menu and credit ratings.
Related terms
- Bills, notes, bondsThe US Treasury maturity buckets: up to 1 year (zero-coupon, sold at a discount), 2–10 years, and 20–30 years (both with semiannual coupons).
- Bond credit spreadExtra yield a corporate or other risky bond pays over a Treasury of similar maturity, quoted in basis points: compensation for default and liquidity…
- Corporate bondDebt issued by a company. It yields a spread over the government bond of similar maturity to pay for default and liquidity risk, and is split by…
- CouponThe interest a bond pays, stated as an annual % of par; in the US usually paid in two semiannual installments.
- Credit ratingA letter grade from S&P, Moody’s or Fitch on an issuer’s ability to repay: AAA/Aaa at the top, BBB−/Baa3 the lowest investment grade, BB+/Ba1 and…
- Current yieldAnnual coupon ÷ market price: the cash-income return of a bond, ignoring the gain or loss as the price pulls to par at maturity.