What is a non-investment grade company?

Non-investment grade securities are those with a rating below Baa3 or BBB- 1. The best-known type is high yield, which are the securities of a publicly-traded company or municipality that has experienced a ratings downgrade or other negative event (so-called “distressed”).

What is non-investment grade debt?

A non-investment grade bond, also called a speculative bond, a high yield bond, an unsecured debenture, or a junk bond, is a bond that is considered a low quality investment because the issuer may default. Non-investment grade bonds offer higher yields than investment grade bonds to compensate for the greater risk.

What companies have a BBB bond rating?

Three companies are rated ‘BBB-‘: Ford Motor Co., Energy Transfer L.P., and Broadcom Inc. These represent 27% of the top 10 debt. The outlooks are stable.

What is the difference between investment grade and non investment grade?

Investors typically group bond ratings into 2 major categories: Investment-grade refers to bonds rated Baa3/BBB- or better. High-yield (also referred to as “non-investment-grade” or “junk” bonds) pertains to bonds rated Ba1/BB+ and lower.

What does Moody’s Baa3 rating mean?

investment grade
Baa3. The lowest rating of investment grade Moody’s Long-term Corporate Obligation Rating. Obligations rated Baa3 are subject to moderate credit risk. They are considered medium grade and as such may possess certain speculative characteristics. Rating one notch higher is Baa2.

What is the difference between investment grade and non-investment grade?

What does Moody’s negative outlook mean?

A positive or negative outlook respectively signals that the credit rating in the medium- to long-term might be raised or lowered, while a stable outlook indicates that the rating most probably will stay at the same level.

Is Moody’s Baa2 investment grade?

Ba2/BB are credit ratings just below investment grade, considered more speculative. Ba2 falls above the Ba3 rating and below Ba1, while BB is above BB- and below BB+. Moody’s uses the Ba2 rating, while S&P and Fitch use BB….

What companies have triple A bonds?

As it stands, only two U.S. corporations have a AAA rating as of February 2020: Microsoft (MSFT) and Johnson & Johnson (JNJ).

What bond rating is junk?

Bonds with a rating of BBB- (on the Standard & Poor’s and Fitch scale) or Baa3 (on Moody’s) or better are considered “investment-grade.” Bonds with lower ratings are considered “speculative” and often referred to as “high-yield” or “junk” bonds.

How do I get my Moody’s credit rating?

To see current and historical credit ratings from Moody’s, S&P, and Fitch, search by company name or ticker. Then, click on ‘Long Term Debt’ and click on an active CUSIP. The 2nd tab, Ratings, will show the current and historical credit ratings for the company.

What is non-investment-grade debt?

Non–investment-grade debt is further sub- divided into leveraged loans, which are loans issued by corporations rated BB+ or below and paying an interest rate of more than LIBOR + 125 basis points, and high yield bonds.

Debt securities issued by corporations rated BBB- and above by S&P or Fitch or Baa3 and above by Moody’s are considered investment-grade, while those that receive a lower rating than that fall in the non–investment-grade or junk category.

What is an investment-grade bond?

Investment-grade bonds are of medium-to-highest credit quality, with AAA or Aaa being the highest rating, indicating the highest safety. Very few corporations—including Johnson & Johnson (JNJ) and Microsoft (MSFT) —are rated AAA or Aaa by rating agencies.

How do investors choose between investment-grade and high-yield securities?

Investors choose between these two on the basis of their individual risk appetite and return expectations. Investors of a more risk-averse temperament seeking to park their funds in safer investments prefer investment-grade bonds, while risk-taking investors often choose high-yield securities in their search for a higher return.