Investment Grade
Bonds that are rated AAA to BBB- are generally considered to be "Investment Grade"
Important of Investment Grade Rating
- Many large managers (Pensions, Insurance Companie) are not legally allowed to own non-investment grade bonds
- As such, this leaves are much smaller pool of capital for non-investment grade bonds
- It also means that these investors have to sell any bonds that drop below investment grade! This could cause those bonds price to drop even faster