Investment-grade, high yield and crossover bonds
Produced in partnership with Shruti Dusaj and Simone Bono of Freshfields LLP

The following Banking & Finance practice note produced in partnership with Shruti Dusaj and Simone Bono of Freshfields LLP provides comprehensive and up to date legal information covering:

  • Investment-grade, high yield and crossover bonds
  • What are investment-grade, high yield and crossover bonds?
  • What are the yields on investment-grade and high yield bonds?
  • Covenants
  • Maturity of the bonds
  • Guarantees
  • Registration

Investment-grade, high yield and crossover bonds

What are investment-grade, high yield and crossover bonds?

Investment grade (IG) bonds refer to debt securities that carry an IG rating, which is anywhere from BBB- and higher on the S&P and Fitch scales and Baa3 and higher on the Moody’s scale (for more information on credit ratings see Practice Note: Credit ratings). IG issuers are typically large blue-chip corporates and often companies whose equity securities are listed on a major stock exchange. Other than sovereign debt of developed economies, IG securities are frequently seen as one of the safest types of income producing investments. However, because IG bonds are considered safe investments, the yields are lower than those of high yield (HY) bonds. Many institutional investors and pension funds have policies and mandates that require them to limit their bond investing to IG bonds or government obligations.

As a broad term, HY bonds are refer to all bonds of issuers that carry a rating that is below IG rating. HY bond issuers may be public companies that do not carry (or at one time did and have subsequently lost) an IG rating, private companies or acquisition vehicles set up to finance leveraged buy-outs. The HY bond investor base may overlap with the IG bond institutional investor base (such as mutual funds and pension funds), but also frequently includes hedge funds,

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