“Non-investment grade” and “speculative grade” refer to the same category of bonds in the category of bond grades.
Non-investment-grade bonds, speculative-grade bonds, trash bonds, or high-yield bonds are terms used to describe bonds with an increased risk of default. Standard & Poor’s, Fitch, and Moody’s all rated these bonds as inferior to “BBB-” and below “Baa3.”
These bonds are referred to as “non-investment grade” or “speculative grade” to indicate their riskiness. When referring to potential return, however, the term “high-yield” is used to emphasize their higher interest rates.
The higher interest rates on these bonds are intended to compensate investors for the additional risk of failure they are assuming. Due to this additional risk, investors who are considering purchasing these bonds should conduct extensive research and consider their risk tolerance.