Definition of speculative grade

Speculative grade issue or issuer ratings are all ratings below BB+ or Ba+ included, down to CC-.

Speculative grade or sub-investment grade issues can be considered "less vulnerable in the short run but face major uncertainties and exposures to adverse business, financial and economic conditions" (BB) or "subject to substantial credit risk" (Ba), to "a marked shortcoming has materialised" or ’typically in default’ (C).

Speculative grade ratings are also called junk bonds.


For the C category: Moody’s defines this category as typically in default with little prospect for recovery of principal and interest. Standard & Poor's (S&P) assigns this rating to obligations that are currently highly vulnerable to non-payment, obligations that have payment arrears allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default.

S&P and Fitch actually have a D grade for default. [1]

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