Also called speculative or a junk bond.
A bond or other debt security is considered non-investment grade when a rating agency judges it a relatively risky investment. , a non-investment grade bond has a higher risk of falling behind schedule on principal and interest payments, or not making payments at all.
The three largest credit rating agencies, Moody’s Investors Service, Standard and Poor’s (S&P), and Fitch Ratings, have similar rating scales. Investments rated Ba/BB or lower are considered non-investment grade.
If a rating agency judges that an issuer has become less likely or able to make payments on its bonds, revenue shortfalls require an issuer to spend its reserves as an example, the rating agency may downgrade the issuer’s rating one or more levels.