The safest tier of borrower a credit rating agency recognizes, judged unlikely to default.
Investment grade is the top tier of credit ratings, covering borrowers judged unlikely to default on their debt, as opposed to the riskier junk, or high-yield, tier below it. Many large institutional investors, pension funds especially, are restricted by their own rules to only holding investment-grade debt, which means a rating downgrade that pushes a company below that line can trigger a wave of forced selling, regardless of whether the company's actual finances have changed much at all.
Part of the Open Bell Glossary — plain-English explanations of the terms that come up on the show. Browse every term.