Investment grade is a rating applied to a municipal and corporate bond with a low risk of default.
Investment grade ranges from a rating of AAA (or Aaa) – a bond seen as having ‘extremely strong capacity to meet financial commitments’ – to BBB (or Baa) – a bond with ‘adequate capacity to meet financial commitments but more subject to adverse economic conditions.’
These ratings are based on a number of factors, but primarily the likelihood that the bond issuer will be able to repay its value in full and on time.
