An Asset-Backed Medium-Term Note (ABMTN) is a type of debt security that is secured by a pool of assets and typically has a maturity period ranging from one to ten years.
The bond discount is the difference between a bond's current market price and its higher face value or maturity value. This phenomenon occurs when bonds are issued below par value or due to market conditions such as rising interest rates or heightened default risk.
A Capped Floating-Rate Note (Capped FRN) is a type of bond that features an interest rate that fluctuates with market levels but has an upper limit or 'cap' to protect issuers against excessive interest rate rises.
A closed period refers to a span of time, often 10 years following the issuance of a bond, during which the bond cannot be called by the issuer.
A collateralized mortgage obligation (CMO) is a type of mortgage-backed security that combines multiple mortgage loans and separates them into tranches based on maturity and risk.
Coupon stripping is a financial process in which the coupons are stripped off a bearer security and then sold separately as a source of cash, with no capital repayment; the bond, bereft of its coupons, becomes a zero coupon bond and is also sold separately.
Current yield is the annual interest on an investment divided by its market price, providing a snapshot of the bond’s rate of return relative to its current price rather than its face value or yield to maturity.
A debt instrument is a document used to raise non-equity finance, typically consisting of a promissory note, bill of exchange, or any other legally binding bond.
A security representing money borrowed that must be repaid, typically having a fixed amount, specific maturity, and usually a specific rate of interest or an original purchase discount.
A deep discount bond is a debt security that sells for a substantial amount below its face value, often at a discount of more than 25%. Unlike original issue discount bonds, these bonds were initially issued at their par value but have since declined in market value.
A deferred interest bond is a type of bond that does not pay interest periodically like traditional bonds. Instead, it accrues interest, which is paid in a lump sum at maturity. An example of a deferred interest bond is a zero coupon bond.
A discount bond is a bond sold for less than its face value or par value. When the bond matures, the investor receives the face value of the bond. Discount bonds can be treasury, municipal, corporate, etc. They offer a way for the issuer to raise capital by selling at a reduced price.
A Eurodollar Certificate of Deposit (CD) is a CD issued by banks outside the United States, primarily in Europe, where both the interest and principal are paid in U.S. dollars. Eurodollar CDs usually have minimum denominations of $100,000 and maturities of less than two years.
Fixed-income refers to a type of investment or income stream where payments are received on a regular schedule and are typically not adjusted for inflation. Common examples include most bonds, certain annuities, and some pension funds.
A discount UK government stock that has been issued by the Bank of England since 1996. A bond can be divided into a set of payments, which are made by the state and sold at a discount.
A Ginnie Mae pass-through security is backed by a pool of mortgages and guaranteed by the Government National Mortgage Association (GNMA), passing through to investors the interest and principal payments of homeowners.
A comprehensive guide exploring the definition, examples, FAQs, related terms, references, and recommended books for understanding global bonds.
A Guaranteed Income Contract is a financial instrument commonly used in the investment and insurance industries to provide a stable, guaranteed stream of income over a specified period of time.
A bond with a maturity of 2 to 10 years, considered to be between short-term and long-term bonds in terms of maturity and risk.
A Medium-Term Note (MTN) is a type of debt security that generally matures in five to ten years, offering issuers flexible financing and investors a range of maturities and interest rate structures.
Original maturity refers to the interval between the issue date and the maturity date of a bond, distinct from current maturity, which measures the remaining time from the present to the maturity date.
A type of debt instrument for which the issuer typically has neither the right nor the obligation to repay the principal amount of the debt. Interest is usually paid at a constant rate or at a fixed margin over a benchmark, such as the London Inter Bank Offered Rate (LIBOR).
A registered bond is a type of bond that is recorded in the name of the holder on the books of the issuer or the issuer's registrar. It can be transferred to another owner only when endorsed by the registered owner. This is in contrast with a coupon bond.
Running yield, often referred to simply as yield, is a financial metric used to measure the annual income generated by an investment relative to its current market 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 in the primary market that carries no equity or other incentive to attract the investor; its only reward is an annual or biannual interest coupon together with a promise to repay the capital at par on the redemption date.
A stripped coupon refers to a small minimum trading unit of a larger security, where the principal amount and the interest payments have been separated and sold as individual zero-coupon securities.
A type of bond for which the entire principal amount matures on a single date rather than in installments over multiple dates.
A U.S. government promissory note issued by the U.S. Treasury with a maturity period of up to one year. T-Bills are sold at a discount to face value, which is paid out at maturity, providing interest income to the investor.
A U.S. Savings Bond is a government bond issued by the U.S. Department of the Treasury designed to provide savings and investment options for American citizens.
Direct government obligations, comprising debt issues of the U.S. government, including Treasury bills, notes, bonds, and Series EE, Series HH, and Series I savings bonds, as distinct from government-sponsored agency issues.
The Yankee Bond Market involves dollar-denominated bonds issued in the United States by foreign banks and corporations. Issuers tap this market when conditions in the U.S. are more favorable compared to other international or domestic bond markets.
Yield to Maturity (YTM), often referred to as Gross Redemption Yield, is a crucial financial metric for investors, reflecting the total return expected on a bond if held until it matures.
