Question of the day
2026-07-16
What is the difference between investment grade (IG) and high yield (HY)?
Answer it out loud first — like you would in the room. Then check yourself:
Reveal the model answer
Model answer
It's a ratings boundary. Investment grade is BBB−/Baa3 and above (S&P/Fitch / Moody's); high yield (a.k.a. 'junk' or 'speculative grade') is BB+/Ba1 and below. IG issuers have lower default risk, tighter spreads, lighter covenants, and broad investor access; HY issuers pay materially wider spreads and accept incurrence covenants and call protection. The 'crossover' zone around BBB−/BB+ is watched closely because falling from IG to HY ('fallen angel') forces some investors to sell and raises borrowing costs. LBO debt is almost always high yield.
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