³ÉÈËÓ°Òô

What are investment-grade, high yield and crossover bonds?

Investment grade (IG) bonds refer to debt securities that carry an IG rating, which is anywhere from BBB and higher on the s&p and Fitch scales and Baa3 and higher on the Moody’s scale (for more information on credit ratings see Practice Note: Credit ratings). IG issuers are typically large blue-chip corporates (well-known, well-established, and well-capitalized companies) and often companies whose equity securities are listed on a major stock exchange. Other than sovereign debt of developed economies, IG securities are frequently seen as one of the safest types of income producing investments. However, because IG bonds are considered safe investments, the yields are lower than those of high yield (HY) bonds. Many institutional investors and pension funds have policies and mandates that require them to limit their bond investing to investments with, on average, lower default rates, such as IG bonds or government obligations.

As a broad term, HY bonds refer to all bonds of issuers that carry