Low-Grade

low-grade

Of or relating to debt that has a credit rating of B or below. Low-grade debt offers an above-average yield but entails substantial risk because promised payments may not be made in a timely manner.

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Low-Grade

A bond with a low rating. Bonds rated less than Baa3 by Moody's or BBB- by S&P or Fitch are considered low-grade bonds. They have higher yields than other bonds because they have a higher risk of default on the part of the issuer. Low-grade bonds are considered sufficiently high-risk that the law does not allow banks to invest in them. They are also called high-yield bonds and, informally, junk bonds.