An accounting term referring to a calculated measure used to compare bonds of varying durations and repayment schedules by averaging the periods for which funds are available, weighted by the amounts available in each period.
A loan in which the whole of the principal is repaid in a single final payment known as a 'bullet', although interest may be paid in interim payments. Compare with an amortizing loan.
A Certificate of Deposit (CD) is a debt instrument issued by a bank that usually pays interest. Institutional CDs are issued in denominations of $100,000 or more, while individual CDs start as low as $100. Maturities range from a few weeks to several years. Interest rates are set by competitive forces in the marketplace.
An assessment of the creditworthiness of an individual or a firm, indicating the extent to which they can safely be granted credit. It is a crucial element in financing and investing decisions.
An exchange-traded note (ETN) is a debt instrument that tracks the performance of a specific index and promises to repay the principal adjusted by applicable fees and index performance. Unlike exchange-traded funds (ETFs), ETNs are backed by the issuer.
The federal deficit (or surplus) refers to the shortfall (or surplus) resulting when the federal government spends more (or less) in a fiscal year than it receives in revenue. The deficit is financed by borrowing from the public via long and short-term debt instruments.
A Floating-Rate Note (FRN) is a type of debt instrument with a variable interest rate that adjusts periodically based on a benchmark interest rate, such as the LIBOR or the federal funds rate.
Funded debt refers to debt that is due after one year and is formalized by the issuing of bonds or long-term notes. It often involves a sinking fund to ensure the debt can be retired systematically.
A General Obligation Bond (GO Bond) is a type of municipal bond backed by the full faith and credit of the issuing government, which has the authority to levy taxes to repay bondholders.
Government agency securities are debt instruments issued by U.S. government agencies that, while often rated highly, are not explicitly backed by the full faith and credit of the U.S. government.
Government securities are debt instruments issued by a government to support government spending and obligations. These securities include Treasury bills, bonds, notes, and savings bonds, all of which are considered highly creditworthy due to the backing of the government's 'full faith and credit.'
A long bond is a bond that matures in more than 10 years. These bonds are riskier than shorter-term bonds of the same quality but normally pay investors a higher yield.
The money market is a wholesale financial market dedicated to short-term borrowing and lending with instruments like Treasury bills, trade bills, and bills of exchange, traditionally concentrated in areas like Lombard Street in London.
A negative yield curve, also referred to as an inverted yield curve, occurs when long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality, often indicating an imminent economic recession.
Open-market rates refer to the interest rates on various debt instruments bought and sold in the open market, which are directly responsive to supply and demand. These rates differ from the discount rate set by the Federal Reserve Board.
Original Issue Discount (OID) refers to the discount from par value at the time a bond or debt instrument is issued. It plays a crucial role in the bond market, particularly in zero coupon bonds, and involves complex tax treatments.
Plain vanilla refers to financial instruments in their simplest, most straightforward form without any exotic features or complexities.
A redeemable bond, also known as a callable bond, is a type of bond that the issuer can redeem before its maturity date at a predefined call price.
Serial bonds are a type of bond issue where parts of the total amount mature at different intervals over a period, rather than all at once on one maturity date. This structure allows issuers to spread out the repayment burden and provides investors with a series of maturing investments over time.
A bond issued by a Japanese-registered company in a currency other than yen but targeted primarily at the Japanese institutional investor market.
A Treasury Bond (T-Bond) is a long-term debt instrument issued by the U.S. government, as well as a term for bonds bought back by corporations.
Unsecured Loan Stock (ULS) is a type of loan stock that is not backed by any assets or collateral, making it riskier for lenders compared to secured loan stocks.
A Yankee bond is a debt instrument issued in the United States by a foreign entity. These bonds are denominated in dollars and subject to regulation by U.S. authorities.
