The current value of an original issue discount bond taking into account imputed interest that has accumulated.
A CMO class, deriving its cash flows form the interest accrual of a Z-Tranche. Because they derive their cash flows from the interest accrual of a Z-Tranche, Accretion Directed CMOs have little extension risk even in very low prepayment speed scenarios, and Accretion-Directed CMOs are also sometimes referred to as Very Accurately Defined Maturity (VADM) classes.
The accumulated coupon interest paid to the seller of a bond by the buyer (unless the bond is in default). The buyer of a fixed-income security must pay the seller of the security to compensate the seller for holding the security between the last coupon payment date and up to but not including the settlement date. The accrued interest, added to the instrument's dollar price, constitutes the net amount.
A CMO tranche that is currently paying principal payments to investors.
Adjustable Rate Mortgage
A mortgage loan on which interest rates are adjusted at regular intervals according to predetermined criteria. An ARM’s interest rate is tied to an published interest rate index.
AD/Short Stated Maturity
An Accretion Directed CMO tranche receives principal payments from the interest that accrues on an Accrual or Partial Accrual class CMO (a Z-Bond). Because the principal payments are guaranteed by the interest from the Accrual bond, an AD bond has no extension risk and its maturity can be accurately defined even down to zero prepayments. AD bonds are also known as VADMs (Very Accurately Defined Maturity).
A financing structure under which new bonds are issued to repay an outstanding bond issue prior to its first call date. Generally, the proceeds of the new issue are invested in government securities, which are placed in escrow. The interest and principal repayments on these securities are then used to repay the outstanding issue until they are able to be called.
Exchange and over-the-counter markets where securities are bought and sold after the initial public offering. Aftermarket is also known as the Secondary Market.
The yield to maturity taking into account federal and state income taxes. This basis is used to compare returns of taxable bonds to the returns of tax-exempt municipal bonds.
Agency Bonds include debt securities issued by the U.S. Government Agencies or Government Sponsored Enterprise (GSE). Federally sponsored agencies are not guaranteed by the US Government but they do involve some level of federal sponsorship.
Examples of federally sponsored agencies:
Federal National Mortgage
Association [FNMA or "Fannie Mae"]
Federal Home Loan Mortgage Corporation [FHLMC or "Freddie Mac"]
Alternative Minimum Tax
A federal income tax levied to make certain that all taxpayers pay some tax. Municipal bonds that have been deemed non-essential to the public as a whole (usually airport or housing revenue bonds) may be subject to taxation if certain tax considerations are met by the investor. These certain tax considerations vary for each investor.
The process of incrementally reducing a debt through installment payments of principal and interest. This also applies to reducing the premium paid for a bond by applying part of the interest payments to premium reduction.
Annual Percentage Yield is the effective annual rate of return, taking into account the effect of compounding interest. It is the annual rate of return for CDs.
The simultaneous sale and purchase of the same or equivalent bonds in such a way as to take advantage of a price difference in separate markets.
Price being sought for the security by the seller.
Bonds or notes backed by loan paper or accounts receivable originated by banks, credit card companies, or other providers of credit. Asset-Backed Securities are often enhanced by a bank letter of credit or insurance coverage.
The process of offering bonds up for bid and selling to the highest bidder.
Asset Backed Securities collateralized by principal and interest payments of automobile loans.
The weighted average time to principal repayment for a mortgage pass-through, or CMO security.
Away From the Market
An order in which the limit bid is below the market value of the security or the limit offer is above the market value.
A bond with a face value of less than $1,000, usually in $100 denominations.
Terminology in the securities industry that refers to the firm's cashier and clearing operations, including the accounting and compliance departments.
A large principal repayment in the later years of some serial bonds.
Bank Qualified Bonds
Indicates if the bond has been designated a “Qualified Tax-Exempt Obligation".
The percentage of the Strike Price in the underlying asset, at which the option comes into existence (Knock-In) or ceases to exist (Knock-Out). Reverse Convertibles are normally issued with a Strike Price set on the Initial Pricing Date. If the underlying
asset price closes, on any day, below the Downside Protection amount of the Strike Price, the option is triggered or “knocked in.”
This percentage is sometimes referred to as "Downside Protection" or "Downside Cushion".
The price of the bonds less any markup/markdown.
One one-hundredth of a percentage point. This is the most common measure of changes in bond yields.
A market trend that describes a sustained movement in the decrease of market.
An instrument that is owned by whoever is in possession of the certificate. Coupons must be submitted to the registrar for that issue to receive interest payments.
The customer who ultimately is the owner of a security, even if the security's title of ownership is in the name of a broker or bank ("street name").
Bid Wanted (BW)
Notice that a holder of securities wants to sell and will entertain bids.
Blended Yield to Maturity (Interpolated)
The combination and average of two points on the yield curve to find a yield at the midpoint.
State laws that require the registration of securities and the regulation of the offering and sale of securities in accordance with antifraud regulation.
Bond Equivalent Yield
A calculation for restating semiannual, quarterly or monthly discount bonds or notes yields into an annual yield.
Registered investment companies whose assets are invested in portfolios of bonds.
A service whereby an issuer can pay a premium to a third party insurer who will provide principal and interest payments to investors in the event of a failure of an issuer default.
A grade given to bonds that indicate their credit quality. Standard & Poors, Moodys and Fitch are entities that provide ratings regarding a bond issuer’s ability to pay principal and interest in a timely fashion.
The portion of an issuer's total debt represented by outstanding long-term bonds.
Book Entry Bond
A bond that has no physical certificate, but records of the owner are kept by a depository and its members (banks and brokerage firms).
A registered person acting as an intermediary between buyers and sellers of securities.
The percentage between the strike price of the option on the underlying security and the price paid for the security. It is the percentage of price that the underlying security can change without resulting in a loss of principal.
Build America Bonds
Bonds issued by state and local governments as federally taxable governmental bonds with Federal subsidies for a portion of their borrowing costs. The program was created through the American Recovery and Reinvestment Act of 2009 to promote economic recovery and job promotion. The subsidies take the form of either tax credits provided to holders of the bonds or refundable tax credits paid to state and local governmental issuers of bonds. These bonds are considered Municipal bonds and MSRB rules are applicable for the sale and settlement of these bonds.
A market trend that describes a sustained market movement when prices are increasing in the market.
A bond with a fixed maturity and no call features.
Buy-In (Close –Out)
When an investor is forced to purchase bonds because the seller did not deliver the securities in a timely manner or at all. The party failing to deliver bonds will be notified in writing. Bonds can then be purchased by the purchaser and the selling party is obligated to pay for any difference.
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The action taken to pay the bond principal and interest prior to the stated maturity date.
A dollar amount paid as a penalty or premium by an issuer who exercises the right to redeem securities
The period of time in which the bond cannot be called. Additionally, specifying a call protection date in the offering search screen will return bonds that will not be redeemed, mature, or be called until at least the date specified. Continuously callable bonds or those callable on 30 days notice will be excluded if a call protection date is specified.
The risk that declining interest rates may accelerate mortgage loan prepayment speeds, causing an investor's principal to be returned sooner than expected. As a consequence, investors may have to reinvest their principal at a lower rate of interest.
A condition of a bond permitting the issuer to redeem it before maturity on specified dates at specified prices.
The highest interest rate that can be paid on a floating-rate security.
CATS-Certificate of Accrual on Treasury Securities, refers to a zero-coupon U.S. Treasury issue that is sold at a deep discount from the face value and pays no coupon interest during its lifetime, but returns the full face value at maturity.
Certificates issued by banks with maturities that vary from a few weeks to several years. The bank agrees to pay a fixed interest rate until a specific maturity date. It is a time based bank deposit that pays interest.
A procedure that allows dealers to complete a delivery of securities they have bought but not yet delivered. Firms can agree to cancel a trade or take a substitution if all parties agree. If bonds are not delivered by the close out date and no further arrangements have been agreed upon, then the purchasing party can buy bonds in the open market to complete the transaction at the expense of the party failing to deliver the bonds.
The final bid and ask price for an issue at the end of the trading day.
Upper and lower limits (cap and floor, respectively) on the interest rate of a floating-rate security.
Assets pledged by a borrower until a loan is repaid. These assets are subject to seizure if the loan goes into default.
Collateralized Mortgage Obligations (CMOS)
Bonds backed by a pool of mortgage pass-through securities or mortgage loans. A type of mortgage backed security that creates separate traunches for different classes of bond holders with varying maturities.
A fee paid to a broker when acting as an agent in a securities transaction.
Commercial Paper securities are short term obligations with maturities ranging from 2 to 270 days, issued by banks, corporations, and other short-term borrowers. Such instruments are unsecured and usually sold at a discount.
A class of tranche found in a planned amortization class (PAC) bond that is responsible for protecting the PAC tranche from both contraction and extension risk. The companion bond is designed to absorb excess principal payments during times of high prepayment speeds and defer receiving principal payments during times of low prepayment speeds.
Compound Accreted Value
The value of a zero coupon bond at any given time, based on the principal, with interest compounded at a stated rate of return over time.
The compensation in an underwriting agreement paid to members of a selling group.
A clause in the indenture of a security that permits the issuing entity to retire the security at a predetermined price, prior to maturity, based on certain events specified in the bond's indenture. Please see prospectus for details on the conditional calls pertaining to the bond prior to purchasing for your client.
Some types of conditional calls -
'A' - 'Change of Control'
'B' - 'Drop in Receivables'
'C' - 'Sale of Equipment'
'D' - 'Destruction of Equipment'
'G' - 'Rating Downgrade'
'H' - 'Tax Law Change'
'I' - 'Stock Premium Inc.' (Callable if stock premium increases by certain amount over convertible bond price)
'J' - 'Proceeds of Stock Off.' (Callable with proceeds of common stock offering)
'Z' - 'Other'
Conditional Puts - Death of Holder
The 'Death Put', also known as 'Survivor Option' or 'Estate Option', is when the issuer is required to buy a bond back at par when the beneficial owner of the bond dies.
A written acknowledgement required to be sent to parties to a transaction to state the terms and execution of an agreement to buy or sell a security.
A bond containing a provision that permits conversion to the issuer's common stock at some fixed exchange ratio.
Constant Maturity Treasury
The average yield of a range of U.S. Treasuries with various fixed maturities. The five- and ten-year CMT are commonly used as indices on floating-rate notes whose rates are tied to long-term interest rates. The index may be found in the Federal Reserve H.15 Report.
Constant Prepayment Rate
The percentage of outstanding mortgage loan principal that prepays in one year, based on the annualized rate of the Single Monthly Mortality (SMM), which reflects the outstanding mortgage loan principal that prepays in one month.
Continuously Callable Bond
These bonds are callable on any date after the first call date until its maturity. The issuer has the right to repurchase bonds back from the investor on any date.
Measure of the sensitivity of the duration of a bond to changes in interest rates.
Company-issued debt instruments that are considered financial obligations of a corporation. Corporate bonds can be broken down into three categories; debentures, medium term notes, and commercial paper. Maturities on corporate bonds can range from three months to one hundred years, and credit quality of issuers will vary. Generally, corporate bonds are broken down into four sectors: industrial, financial, transportation, and utility. They can be issued in both callable and non-callable formats.
Cost of Funds Index (COFI), 11th
The monthly weighted average cost of -interest paid on checking and savings accounts at institutions operating in Arizona, California and Nevada that are members of the 11th Federal Home Loan Bank District. Published on the last day of the month, the rate reflects the cost of funds for the prior month.
(1) The interest rate, expressed as a percent, paid on a bond.
(2) The detachable part of a bearer bond that denotes the amount of interest due, on what date, and where payment is to be made. Coupons generally are payable semiannually.
The established date for the interest payment on a bond. Most bonds pay semi-annual interest payments. There are also bonds that pay interest monthly, quarterly or at maturity.
The stated annual interest rate on a security.
Usually the Federal Reserve Commercial Paper Composite calculated each day by the Federal Reserve Bank of New York by averaging the rate at which the five major commercial paper dealers offer "AA" industrial Commercial Paper for various maturities. Most CP-based floating-rate notes are reset according to the 30- and 90-day CP composites.
The Consumer Price Index for All Urban Consumers, published by the Bureau of Labor Statistics of the U.S. Department of Labor. It measures changes in the price of a basket of goods purchased by urban consumers.
Credit Card Receivables
Asset Backed Securities collateralized by credit card debt.
A yield difference, typically in relation to a comparable U.S. Treasury security vs a non Treasury security that are identical in all respects except for quality rating.
Credit support purchased by an issuer from an entity other than a monoline insurer.
The current remaining monthly principal on a mortgage security. Current face is computed by multiplying the original face value of the security by the current principal balance factor.
A measure of the return on a bond, calculated by dividing the annual interest on the bond by the amount paid for the bond. It is the actual income rate or the yield to maturity as opposed to the coupon rate.
The nine digit ID assigned to a bond by the Committee on Uniform Security Identification Procedures, which was established under the auspices of the American Bankers Association to develop a uniform method of identifying securities.
An evidence of ownership of a security that is actually held by the transfer agent. The security is non transferable in this form.
The effective date of a new issue and the date from which the bondholder is entitled to receive interest. The bondholder may actually receive the bonds on a different date.
The date of a bond issue from which the first owner of a bond is entitled to receive interest.
An order that is valid only for the remainder of the trading day in which it was entered.
The industry standard name for a CMO or asset-backed deal. Freddie Mac Deal Numbers are simple chronological sequence numbers. Fannie Mae, Ginnie Mae and many private label CMOs and asset backed Deal Numbers consist of a hyphenated combination of the year of issuance and a sequence number, e.g., FNR 2005-47 represents the 47th Fannie Mae deal in 2005.
An individual or firm acting as a principal rather than a broker or agent. An individual or entity, such as a securities firm, that acts as a principal and stands ready to buy and sell for its own account.
Unsecured debt obligation, used against the general credit of a corporation, rather than against a specific asset.
Failure to pay principal or interest when due.
Deep Discount Bonds
Bonds selling for a price much less than the par value,. Bonds selling at an original issue discount are not included in this category.
De Minimis Rule
A rule that states capital gains tax must be paid on a bond purchased in the secondary market at a discount to the face value in excess of a quarter of 1% multiplied by the number of full years to maturity. This entitles the holder to preferential capital gains tax rates on the appreciation to par (within De Minimis). If the purchase price is below the cut off threshold all appreciation to par is subject to ordinary income tax rates (at Market Discount).
The increments or values of bonds for purchasing and delivery purposes.
The difference between a bond's current market price and its face value. This can be expressed in either a dollar amount or as a percentage.
The effective spread to maturity of a floating-rate security after discounting the yield value of a price other than par over the life of the security.
Short-term obligations issued at discount from face value, with maturities ranging from overnight to 360 days. Interest is paid at maturity.
The rate the Federal Reserve charges for loans to member banks.
The yield on a security sold at a discount.
The fixed or floating rate paid on preferred stock.
The unit in which the market quotes a fixed-income security, usually stated as a percentage of the security's face value, the fractional component of which may be quoted in terms of decimals, 8ths, 32nds, or 64ths. The dollar price does not include accrued interest.
Bonds that are exempt from both state and federal income taxes.
The lowering of a bond's rating.
The percentage of the Strike Price in the underlying asset, at which the option comes into existence (Knock-In) or ceases to exist (Knock-Out). Reverse Convertibles are normally issued with a Strike Price set on the Initial Pricing Date. If the underlying asset price closes, on any day, below the Downside Protection amount of the Strike Price, the option is triggered or "knocked in".
Investigation of a bond issue by bond counsel for underwriters and issuers to insure that all material information has been included in the official statement.
The linear measure of how the price changes in response to interest rate changes.
An option that is an inseparable part of another instrument.
A financial market of a developing country, usually a small market with a short operating history.
Proceeds from a new bond issue are held in a separate escrow account to pay off existing bond issue when it matures.
Escrowed to Maturity
Excess revenues from an issue are placed in an escrow account for the express purpose of ensuring payment of bonds at maturity. When funds in the escrow account are adequate to pay off the bond, it becomes escrowed to maturity.
Exclude Bid Side Only
When searching for bonds, users expect to receive search results with an offer side only market and/or bonds that have a two-sided market. They do not expect to see bonds with a bid side only market on search results. This check box defaults to selected to prevent bonds with bid side only markets from being returned in search results.
The interest on these bonds is not considered tax preference items, and therefore is not used in calculations to determine potential liability to AMT.
The risk that rising interest rates will slow the anticipated rate at which mortgages or other loans in a pool will be repaid, causing investors to find their principal committed longer than expected.
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The value at maturity of a bond. This is also called par. The principal amount the bond will pay at maturity.
A decimal value reflecting the proportion of the outstanding principal balance of a mortgage security, which changes over time, in relation to its original principal value.
Factored quantity is the outstanding amount of pro rata bonds that pay down concurrently based on the proportion of the balance of bonds outstanding in the issue.
The Federal National Mortgage Association. A Government Sponsored Enterprise (GSE) of the US Government for the purpose of making and guaranteeing loans. Monthly principal and interest payments are guaranteed by FNMA but not directly by the U.S. Government.
FDIC TLGP Insured (Federal Deposit Insurance Corporation -
Temporary Liquidity Guarantee Program)
Temporary Liquidity Guarantee Program – a temporary FDIC guarantee of newly issued senior unsecured debt and the temporary and unlimited FDIC guarantee of the coverage of funds in non-interest bearing transaction accounts at FDIC insured institutions.
Fed Funds Effective Rate
The overnight rate at which banks lend funds to each other, usually as unsecured loans from regional banks to money center banks. The Fed Funds rate is the average dollar weighted rate of overnight funds.
Federal Financial Institutions Examination Council (FFIEC)
The Council is a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS), and to make recommendations to promote uniformity in the supervision of financial institutions.
Federal Funds Rate
The interest rate charged by banks on loans of their excess reserve funds to other banks. The Federal Reserve's ability to add or withdraw reserves from the banking system gives it close control over this rate.
Federal Reserve Bank
One of 12 central banks that make up the Federal Reserve System. These banks regulate money, banking and credit.
Federal Reserve Board
The governing board of the Federal Reserve System. Their responsibilities include setting bank reserve requirements, discount rates, implementing monetary policies, establishing regulations for banks and maintaining stability of the financial system.
Financial Sector Bonds
Bonds issued by companies in the financial sector may include: Banks, Finance, Insurance, Brokers, REITS, and Savings & Loans.
This term applies to bids and offerings that are available for execution at the quoted price and quantity, usually for a limited period of time.
Securities offered for sale at firm prices.
First Call Date
The earliest date in a schedule of call dates, indicating the prices at which a bond can be called on each corresponding call date. This schedule accompanies the right of a bond issuer to redeem a bond before its maturity date.
Fitch Credit Ratings
A designation given by Fitch to indicate the relative credit quality, or the strength of the ability to pay a bond's obligation.
A security, such as a note or bond, that pays a stated rate of interest during the term of the security and returns principal at maturity.
A bond that is trading without accrued interest.
A bond sold with a variable or floating interest rate that changes at intervals ranging from one day to one year.
A bond for which the interest rate is adjusted periodically according to a predetermined formula, usually linked to an index.
A CMO tranche which pays an adjustable rate of interest tied to a representative interest rate index such as the London Interbank Offered Rate (LIBOR), the Constant Maturity Treasury (CMT), or the Cost of Funds Index (COFI).
The lower limit for the interest rate on a floating-rate bond.
Any issuer which is a foreign government, a national of any foreign country, or a corporation or other organization incorporated or organized under the laws of any foreign country.
Trading of securities between investors who do not use the services of broker dealers or an exchange.
Freddie Mac (Federal Home Loan Mortgage Corporation)
A Government Sponsored Enterprise (GSE) that purchases residential mortgages in the secondary market and pools them for sale in the capital markets as mortgage backed securities.
The interval of time (semi-annually, quarterly) at which interest payments are paid to the owner of a bond .
General Obligation (GO)
Municipal bonds backed by the full faith and credit (taxing and borrowing power) of the municipality issuing the bonds.
A high grade bond issued by a blue chip company and meets its required payments of principal and interest with little risk of default.
Ginnie Mae I
Pass-through mortgage securities on which registered holders receive separate principal and interest payments on each of their certificates. Ginnie Mae I securities are single-issuer pools.
Ginnie Mae II
Pass-through mortgage securities on which registered holders receive an aggregate principal and interest payment from a central paying agent on all of their Ginnie Mae II certificates. Ginnie Mae II securities are collateralized by multiple-issuer pools or custom pools, which contain loans from one issuer, but interest rates that may vary within one percentage point.
Bonds issued by governments or agencies of governments.
Mortgage Association (GNMA)
Also known as "Ginnie Mae." A US Government owned corporation operated within the Department of Housing and Urban Development that provides guarantees on Mortgage Backed Securities backed by federally insured or guaranteed loans. The securities are the only mortgage backed securities guaranteed by the U.S. government.
Government Sponsored Enterprise (GSE)
Privately held corporations with the public purpose to reduce the cost of capital for certain borrowing sectors.
Special-purpose vehicle set up to issue fixed-rate capital securities and use the proceeds to purchase debt of the parent company.
An investment made with the intention of minimizing the impact of adverse movements in interest rates or securities prices and minimize exposure to market risk.
Top-rated bonds, usually triple-A, that carry relatively little risk of default.
High Yield Bonds
Also called "junk bonds." These bonds are usually rated lower than BBB/Baa and are considered to have a higher risk of default. The yields are also higher on these bonds than on investment grade bonds.
Home Equity Loans
The largest category of Asset Backed Securities, these securities are collateralized by home equity loans.
Hospital Revenue Bonds
Bonds issued by a municipal or state agency to finance construction maintenance or operation of hospitals or nursing homes.
Bonds issued by a municipal or state agency to finance construction of single-family or multifamily housing.
IDC Financial Publishing Rank
Ranks are the opinion of IDC Financial Publishing, Inc. Ranks range from 1 (the lowest) to 300 (the highest) and fall into one of the following six groups:
Superior (200-300) Banks rated Superior are simply the best by all measures. In addition to favorable capital ratios, most consistently generate ROE above COE.
Excellent (165-199) Banks rated Excellent are strong institutions. Their ratios reflect quality management both from a balance sheet and income performance standpoint. Operating expenses and costs of funding are under control, producing a healthy return on equity (ROE).
Average (125-164) Banks rated Average meet industry capital standards. When compared to excellent and superior rated banks, most exhibit lower quality loans and narrower profit margins. A specific problem is a low operating profit margin, and/or a large standard deviation in the operating profit margin. The marginal problems of the average bank require shifts in policies and practices to raise asset quality or improve profits.
Below Average (75-124)Banks rated Below Average represent institutions under strain. Average loan delinquency is high. In some banks, liquidity ratios demonstrated risk. In many, excess high risk loans or assets are above the loan loss reserve and threaten equity capital. A specific problem is a low operating profit margin, and/or a large standard deviation in the operating profit margin. Return on financial leverage is negligible, on average, due to narrow (or negative) leverage spreads. Banks are also rated Below Average
if they are deemed "Adequately Capitalized" per FDIC capital definitions.
Lowest Ratios (2-74)This Lowest Ratios group contains some banks with less than minimum capital required. In some banks, liquidity ratios demonstrated risk. In many, increasing loan loss provisions expand net losses on the income statement and, along with the excess of net charge-offs, reduce capital ratios. A specific problem is a low operating profit margin, and/or a large standard deviation in the operating profit margin. A high number of failed banks were rated Lowest Ratios prior to failure. Banks are also rated Lowest Ratios if they are deemed "Under Capitalized" or "Significantly Under Capitalized" per FDIC capital definitions. Banks may also be rated Below Average if they are deemed "Adequately Capitalized" and have a high volatility in operating profit margins.
Rank of One (1)Banks in the Rank of One group have the highest probability of failure. Loans 90-days past due, non-accrual loans, restructured loans, and other real estate owned, on average, exceed the loan loss reserve and equity capital by a wide margin. Liquidity ratios demonstrated risk. Without major balance sheet improvement, these banks will fail. Banks are also rated Rank of One if they are deemed "Critically Under Capitalized" per FDIC capital definitions.
Each bank in the Bank Financial Quarterly has a one-line analysis of financial ratios and a one-number summary rank. IDCs' unique CAMEL analysis utilizes financial ratios that have a significant impact on the quality of banks:
Capital risk is determined by Tier I capital as a percent of assets and as a percent of risk-based assets. Tier I & II capital as a percent of risk-based assets (risk-based capital ratio) measures credit and interest rate risk as well as estimates risks in the asset base.
Asset quality is measured by the levels of loan delinquency, non-accrual loans, and high risk assets relative to loan loss reserves and capital ratios. Risk-adjusted assets as part of the risk-based capital ratio further define the quality of assets.
Margins are the best measurement of management's financial controls. Margins represent the spreads between 1) operating profit and net operating revenues, 2) after-tax return on earning assets and cost of funding, and 3) the return on equity compared to estimated cost of equity capital, and 4) NOPAT return on equity compared to the cost of equity capital.
Earning returns measure the success of the bank's operating strategy. Ratios of revenue yields from investments, loans, and non-interest income with comparison to operating costs, loan loss provision, net loan charge-offs, and net non-operating income ratios are the major components of the net operating after-tax return on earning assets (ROEA). Earnings from financial leverage measure the level of leverage and after-tax cost of funding compared to the after-tax return on earning assets (ROEA). Leverage returns measure the efficiency of the bank's financial strategy. Operating assets are financed with the leverage of deposits and borrowings to Tier I capital and its comparative cost. The leverage multiplier illustrates the degree of leverage, while the leverage spread measures its cost relative to operating returns (ROEA).
Liquidity measures 1) balance sheet cash flow as a percent of Tier I capital and 2) illiquid loans compared to stable deposits and borrowings plus available lines of credit at the Federal Home Loan Bank. Leverage returns measure the efficiency of the bank's financial strategy. Operating assets are financed with the leverage of deposits and borrowings to Tier I capital and its comparative cost. The leverage multiplier illustrates the degree of leverage while the leverage spread measures its cost relative to operating returns.
By Asset Size (Dollars in Millions) Range of Rank Bank Hold Co's Total Banks $2,000 or More $500 to $2,000 $200 to $500 $100 to $200 $50 to $100 $30 to $50 $30 or Less 200 - 300 Superior 321 2,939 148 338 636 661 582 302 272 165 - 199 Excellent 170 1,372 58 153 292 314 298 154 103 125 - 164 Average 205 1,483 51 142 285 358 339 178 130 75 - 124 Below Average 159 1,023 14 82 194 255 259 116 103 2 - 74 Lowest Ratios 71 369 12 53 87 89 76 32 20 1 Rank of One 29 71 2 1 23 19 9 11 6 NC Not Calculated 0 0 0 0 0 0 0 0 0 TOTALS: 955 7,257 285 769 1,517 1,696 1,563 793 634
A bond that has a coupon rate that varies according to some underlying index
Bonds issued by companies in the Industrial sector, which may include manufacturers of materials, energy, capital goods, consumer durables and non-durables.
Industrial Revenue Bonds
A security issued by a state, political subdivision or certain agencies or authorities, for certain specific purposes, but backed by the credit of a private enterprise.
Notes periodically issued by the US Government or GSEs whose return is adjusted with changes in the PPI or CPI.
For an inflation-indexed security, the principal amount of the security, derived by multiplying the par amount by the applicable index ratio.
Many municipal bonds are backed by municipal bond insurance that is specifically designed to reduce investment risk. In the event of a default, the insurance company guarantees payment of principal and interest to the investors for as long as the default lasts. Most insured bonds carry the highest quality credit rating.
Initial Offering Price
The price to an investor for a new bond. This is generally expressed as a percentage of face value. The bonds may not be sold at any lower price during the initial offering period.
Bonds which can be converted from registered to coupon form, or vice versa, upon demand by the bearer.
Compensation paid for the use of money, usually expressed as a percentage rate.
The annual percentage rate of interest paid on the principal of a specific issue of notes or bonds.
A CMO tranche that pays an adjustable rate of interest that moves in the opposite direction from movements on a representative interest rate index such as the London Interbank Offered Rate (LIBOR), the Constant Maturity Treasury (CMT) or the Cost of Funds Index (COFI). A bond that has an inverse relationship to short term interest rates.
Bonds considered appropriate by conservative investors because they represent moderate to low risk. These bonds are usually rated with the top four grades in the rating services. (e.g. Moody's, S & P, Fitch)
IO (Interest Only) Security
In the case of a CMO, an IO tranche is created deliberately to pay only interest and not principal. IO securities are priced at a deep discount to the "notional" amount of principal used to calculate the amount of interest due.
The date on which a security is deemed to be issued or originated and interest begins to accrue.
The description of the bond listing title of the issue, name of issuer, coupon and maturity date.
A legal entity that develops, registers and sells securities for the purpose of financing its operation.
Ginnie Mae II pass-through mortgage securities collateralized by pools that are generally larger and contain mortgages that are often more geographical diverse than single-issuer pools. Mortgage loans in jumbo pools may vary in terms of the interest rate within one percentage point.
A Z-tranche that may start receiving principal payments before prior tranches are retired if market forces create a "triggering" event, such as a drop in Treasury yields to a defined level, or a prepayment experience that differs from assumptions by a specific margin. "Sticky" jump Z-tranches maintain their changed payment priority until they are retired. "Non-sticky" jump Z-tranches maintain their priority only temporarily for as long as the triggering event is present. Although jump Z-tranches are no longer issued, some still trade in the secondary market.
A security with a claim on a corporation's assets and income that is subordinate to that of a senior security. For example, common stock is junior to preferred stock, which is junior to unsecured debt such as debentures, which is junior to secured debt.
A debt obligation with a rating of BB or lower, generally paying interest above the return on more highly rated investment grade bonds; sometimes referred to as high-yield bonds.
An opinion concerning the validity of a securities issue with respect to statutory authority, constitutionality, procedural conformity and usually the exemption of interest from federal income taxes. The legal opinion is usually rendered by a law firm recognized as specializing in public borrowings, often referred to as "bond counsel."
The use of borrowed money to increase investing power.
London Interbank Offered Rate. The rate banks charge each other for short-term Eurodollar loans. LIBOR is frequently used as the base for resetting rates on floating-rate securities.
A limit order is an order to buy a security at no more (or sell at no less) than a specific price. This gives the customer some control over the price at which the trade is executed, but may prevent the order from being executed.
Limited Tax Bond
A bond secured by a pledge of a tax or category of taxes limited to rate or amount.
The amount a securities holder may receive in case of a liquidation of the issuer.
Capacity of a market to absorb a reasonable level of selling without significant losses.
Bonds that are listed and traded over the major exchanges: NYSE, AMEX.
The period of time before a CMO investor will begin receiving principal payments.
Make Whole Call
A type of call provision allowing the issuer to pay off the remaining debt. The issuer must pay bondholders based on the net present value of all future coupon payments that would have been made. In this way, bondholders are �made whole.�
A pricing methodology used to sell the bond at its best price available at the time the order is filled.
Market Discount Point
The threshold price which determines the tax treatment of a bond purchased in the secondary market at a discount. If purchased above the Market Discount Point (within De Minimis) the appreciation to par is generally taxed at preferential capital gains tax rates. If purchased below the Market Discount Point (at Market Discount) the appreciation to par, in its entirety, is subject to ordinary income tax rates. See De Minimis Rule.
The recording of the actual market values of securities.
A firm or person that accepts risk and is actively involved in making bids and offers in certain securities to facilitate trading in that security.
An order placed to be executed at the current best available price.
A feeling or atmosphere regarding the trading in a market. If dealers and market makers are actively trading with narrow margins, the tone is considered good. When the trading is less active and spreads are larger, it is considered poor.
A measure of the ease with which a security can be sold in the secondary market.
The fee charged by a dealer who buys or sells a security as principal and buys or sells it at a higher price. The fee is included in the price of the bond and is not listed separately in the order confirmation.
MarketView is a price discovery tool, which aggregates several points of current market data including reported trades from TRACE or MSRB for a specific CUSIP, and comparable offerings on the BondDesk platform.
The date when the principal amount of a security becomes due and payable.
A debt security issued under a program that allows an issuer to offer notes continuously to investors through an agent. The size and terms of medium-term notes may be customized to meet investors' needs. Maturities can range from one to 30 years.
Minimum Amount to Invest
The dollar amount equal to the factor adjusted amount (or current face) of the offering.
Dollar amount of one bond or the minimum dollar increment that can be purchased.
Minimum Denomination Quantity (Min
The minimum amount required to create an order (minimum purchase amount).
Moody's Credit Ratings
Moody’s ratings are a measure of long term risk of each issuer’s ability to meet debt payments taking into account changes in management strategy, regulatory trends, and the next economic cycle or longer. Moody's uses a multidisciplinary or "universal" approach to risk analysis, which aims to bring an understanding of all relevant risk factors and viewpoints to every rating analysis. They rely on the judgment of a diverse group of credit risk professionals to weigh those factors in light of a variety of plausible scenarios for the issuer and thus come to a conclusion on what the rating should be.
Moral Obligation Bond
A revenue bond, which in addition to its primary source of security, possesses a structure whereby a state pledges to make up shortfalls in a debt service reserve fund, subject to legislative appropriation. There is no legal obligation for the state to make such a payment, but market participants recognize that failure to honor the "moral" pledge would have negative consequences for the state's own creditworthiness.
A legal instrument that creates a lien upon real estate securing the payment of a specific debt.
Mortgage-Backed Security (MBS)
A bond backed by mortgages issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Government National Mortgage Association. The investors receive payments from the interest and principal payments made from the mortgages.
An entity that originates mortgage loans, sells them to investors and services the loans.
A loan secured by a mortgage.
A security representing a direct interest in a pool of mortgage loans. The pass-through issuer or servicer collects payments on the loans in the pool and "passes through" the principal and interest to the security holder on a pro rata basis. A bond backed by mortgages issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Government National Mortgage Association.
Fixed income securities issued by state and local governments or their agencies.
Multi Call Bond
These bonds are typically callable only on interest payment dates.
Narrowing the Spread
Also called "Closing the Market." The action taken by a dealer to reduce the difference between bids and offers.
A computerized system that facilitates trading and provides price quotations on more than 5,000 of the more actively traded over the counter stocks.
A bond that is close to its maturity date.
When the bond’s yield curve is concave. The rate of change of its duration measured as the second derivative of price with respect to yield.
Negative Credit Watch
A CreditWatch listing gives a rating agency's opinion regarding the potential direction of a rating and serves notice that there has or will be a change in creditworthiness. Being the object of a negative credit watch generally indicates the credit quality of a firm's debt has deteriorated and may be downgraded.
The total amount an investor pays for a bond.
Securities that are publicly offered for the first time, whether in an IPO or as an additional issue of stocks or bonds by a company that is already public.
The amount of proceeds greater than the amount of the bonds being refunded.
Market for new issues of bonds and notes.
Next Auction Date
Date when the next interest/dividend rate will be determined.
The date the next scheduled interest payment will be issued.
A bond that cannot be called either for redemption by or at the option of the issuer before its specified maturity date.
Short-term instruments to pay specified amounts of money, secured by specified sources of future revenues, such as taxes, federal and state aid payments and bond proceeds. Generally notes are issued with a maturity date ranging from one year to 10 years.
Notice of Sale
The announcement of a sale of a municipal bond at competitive bidding. The announcement will include the place, date and time of the sale, the principal amount and other information about the issue.
A trade made for less than the normal trading unit for that bond.
The price at which a seller will sell a security.
A solicitation for a quote from an investor interested in buying a bond.
Offer is Spread
The offer retuned on an offer wanted request is spread to an underlying security. An offer price will move in conjunction with the price movements of the underlying security it is spread to.
The first day a security is offered for sale to the public.
The price at which a new security is sold and the lowest price available for a round lot of securities.
The price (expressed in eighths of a point) or yield (expressed in decimals) for each maturity of a serial bond. Used primarily with municipal bonds.
Official Notice of Sale
A paid announcement made by a municipality regarding an upcoming competitive bond sale.
The document an issuer provides detailing financial and other information about the issuer and the securities.
Option-Adjusted Spread (OAS)
For a security with an embedded option, the yield spread over a comparable Treasury security after deducting the cost of the option.
A right to retire all or part of an issue prior to the stated maturity during a specified period of years, often at a premium. The right can be exercised at the option of the issuer.
A commitment made to buy or sell a stated number of bonds at the offered price.
The face value or original principal amount of a security on its issue date.
Original Issue Discount
The amount below par at which new securities are sold when first offered for sale.
Original Issue Discount
A bond issued at a dollar price less than par that qualifies for special treatment under federal tax law. Under federal tax law for tax-exempt bonds, the difference between the issue price and par value is treated as tax-exempt interest rather than capital gain.
Original Issue Quantity
Original dollar amount or number of bonds of an issue.
The net amount received by an issuer after payment of all expenses that occurred during the issuance of the bond.
Trading conducted outside an exchange.
The inventory a firm or trader holds at the end of the trading day.
Limits search results to items offered by your firm on the BondDesk ATS.
P&I (Principal & Interest)
The term used to refer to regularly scheduled payments or prepayments of principal and of interest on mortgage securities.
PAC (Planned Amortization Class) Tranche
A CMO tranche that uses a mechanism similar to a sinking fund to determine a fixed principal payment schedule that will apply over a range of prepayment assumptions. The effect of the prepayment variability that is removed from a PAC bond is transferred to a companion tranche.
The principal amount of a bond. The amount the issuer is expected to pay when the bond matures.
Two or more issues having the same priority of claim or lien against pledged revenues.
The amount of leverage, usually expressed in percentage movement in the underlying asset, that characterizes the upside return of a Structured Product. Structured Notes often employ some degree of leverage or Enhanced Return on the upside, frequently combined with a cap on the return.
The amount of leverage, usually expressed in percentage movement in the underlying asset, that characterizes the upside return of a Structured Product. Structured Notes often employ some degree of leverage or Enhanced Return on the upside, frequently combined with a cap on the return. The following is a list of the different types of participation:
Straight Participation - Return is based on initial and final underlying levels; does not include averaging over more than 20% of the term of the investment. Participation Rate is fixed on pricing date.
Averaging Participation - Return is based on periodic averaging for more than the final 20% of the term of the investment (tail averaging). Participation Rate is fixed on pricing date.
Variable Participation - Participation Rate is not fixed on pricing date, and is dependent on changes in the underlying.
Enhanced Participation - Positive investment return is based on change in underlying with a ratio greater than one.
A pass-through is a security representing pooled debt obligations repackaged as shares. The owner of a pass-through will receive income from the issuer, which itself receives income from the pooled group of debtors.
Place where principal and interest are payable, usually a designated bank or the office of the treasurer of the issuer.
The date that principal and/or interest payments are paid to the record owner of a security.
A floating-rate note with no stated maturity date.
In the case of a CMO, a PO tranche is created deliberately to pay investors principal only and not interest. PO securities are priced at a deep discount from their face value.
An abbreviation for one percentage point. For a bond, a point is $10 per $1,000 bond.
A unique six-character identifying number for every MBS pass-through (pool). Pool numbers, assigned by the issuing agency, are the most commonly used identifier for pass-throughs. Freddie Mac pool numbers may be specified with a hyphen between the pool prefix (the first two characters), which identify the type of loan collateral in the pool and the rest of the pool number (e.g., �C5-1234� or �C51234�).
A description of the type of loans in an MBS pool, identifying, at least the issuing agency and original term.
The status of an investor's securities in their portfolio.
The date offerings were put on the BondDesk ATS system. When entering search criteria, the search range can be defined by entering the least number of days (d), months (m) or years (y) to maturity in the POSTED SINCE field. For example, -1d would return all offerings added in the last day.
Stock that pays a specific dividend before any dividends are paid to common stock holders. A preferred stock takes precedence over common stock in the event of liquidation. Preferred stock usually does not carry voting rights.
The amount over the par value for a bond.
A bond with a price above the par value.
A provision that allows the issuer to call the bond prior to the maturity date at a price above the par value of the bond.
The unscheduled partial or complete payment of the principal amount outstanding on a mortgage or other debt before it is due.
The risk that falling interest rates will lead to heavy prepayments of mortgage or other loans - forcing the investor to reinvest at lower prevailing rates.
Bonds that will be called on the stated call (pre-refunded) date. The monies used to call the bonds are on deposit in an irrevocable escrow account from the proceeds of a more recent bond issue from the same issuer. Bonds are pre-refunded in order to take advantage of the lower interest rates, thus lowering the issuer's interest expense.
The value today of a sum of money available in the future based on a certain interest rate. This method allows investors to determine the amount of money to be invested to receive a specified amount in the future.
The dollar amount per bond stated as a value of $100.
The market for new issue securities.
The lowest interest rate charged by commercial banks to their best corporate customers.
A means of compensating the broker-dealer of a bond trade solely on the basis of a markup/markdown or spread established through purchasing and selling bonds for their own account.
There are multiple levels of protection for the initial investment in a structured product:
The term used to describe a mortgage security whose issuer is an entity other than a U.S. government agency or U.S. government-sponsored enterprise. Such issuers may be subsidiaries of investment banks, financial institutions or home builders.
The money received by a bond issuer at the close of the issuance of new securities.
The agreements imposing obligations on the bond issuer to protect the bondholders. Requirements included are segregation of funds and adequate debt service coverage among others.
A temporary credit rating of an issuer by a credit rating agency. The provisional rating is revised when the agency receives the complete financial information on the issuer.
Public Housing Authority
Tax-exempt bonds, backed by the federal government, issued by local housing authorities to finance public housing. No new bonds of this type have been issued since 1974.
The sale of securities to general investors. Corporate securities are filed with the Securities and Exchange Commission. Municipal securities are usually also filed with the Municipal Securities Rulemaking Board.
A bond that is redeemable by the holder at his option or upon certain circumstances.
Quantity in Bonds
The number of bonds (i.e. 10 bonds = $10,000.00 face value).
Quantity in $ Face Value
The value of a bond paid back at maturity. Most bonds have a face value of $1,000; therefore $10,000.00 = 10 bonds.
Bonds that do not have prices can be bought or sold after placing a Quote Request. Once the quote is received, you can choose to buy or sell the bond.
Quote Wanted (QW)
Notice by a potential buyer of a security that he or she is looking for an offer by a potential seller of the security.
A set of prices consisting of the opening price, high sale, low sale and current sale prices of the day for a given bond.
Rate of Return
The current yield or yield to maturity.
The adjustment of the interest rate on a floating-rate security according to a prescribed formula.
A credit rating of a security provided by an independent rating agency.
For an inflation-indexed security, the yield based on the payment stream in constant dollars, i.e. before adjustment by the index ratio.
The return on a bond, considering purchase price and reinvestment of the coupon payments at a stated rate of interest.
The date for determining the owner entitled to the next scheduled payment of principal or interest.
The retirement of securities by repaying the face value or the call price to the bondholders.
The amount by which the "call" price of a security exceeds its principal, or par value.
The underlying asset or index the structured product is linked to. The most popular underlyings used are single stock, domestic and international equities indices, commodities, and currencies. Other underlying reference assets can be baskets of individual shares, indices of house prices, the prices of managed funds including hedge funds, and a variety of other financial assets.
The redemption of a bond issue by a new bond issue at conditions generally more variable to the issuer.
A bond whose owner's name is printed on the certificate and is recorded on the books of the bond issuer. The bond may only be transferred when the bond is endorsed by the registered owner of the bond.
The name in which a security is registered, as stated on the certificate or on the books of the paying agent. Principal & Interest payments are made to the registered owner on the record date.
The party responsible for maintaining records of the beneficial owners of a security on the behalf of a bond issuer.
Regular Way Trade
A trade that is settled through the regular settlement cycle for that instrument. The cycle is the time that the regulations of the secondary market allows for the buyer to complete payment for the seller to deliver the goods being purchased. Settlement cycles are determined by the asset class.
The risk that interest income or principal repayments will have to be reinvested at lower rates in a declining rate environment.
Real Estate Mortgage Investment Conduit. A complex pool of mortgage securities created to acquire collateral. A fixed pool of mortgages broken apart and sold as individual securities.
Indicates the frequency of the interest payments.
In a REMIC, the residual is that tranche which collects any cash-flow from the collateral that remains after obligations to the other tranches have been met.
A field for identifying states where commercial agreements or state laws prevent the sale of CD’s to residents of the particular state.
Retail Lottery Bonds
A CMO class, created for retail investors, which trades with a one factor. In contrast to most tranches, where every investors current principal balance pays down in proportion to the tranche as a whole, individual lots of retail lottery bonds always trade with a one factor until they are called at random.
Revenue bonds are issued to finance projects or enterprises in which the bond issuers pledge to the bondholders the revenues generated by the financed projects. Revenue bonds can be used to finance hospitals, water and sewage systems, tunnels, bridges, and turnpikes. Revenues can come from user fees and tolls and are used to repay the bonds.
Just a few types of revenue bonds are:
Revised Issue Price
The original issue price plus any accrued original issue discount.
A unit of trading or a multiple of that unit. Typically $100,000 is the measure of a round lot of bonds.
Rules of Fair Practice
The regulations governing the conduct of the members of the FINRA.
S&P Credit Ratings
Standard & Poor's issues credit rating based on the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs.) It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated.
The storage and protection of customers' securities, typically held in a vault, provided as a service by a bank or institution acting as agent for the customer.
The coupon rates, offering prices and yields for each maturity of a serial bond.
The market in which securities are traded after they are initially offered in the primary market.
Debt backed by specific assets or revenues of the borrower. In the event of default, secured lenders can force the sale of such assets to meet their claims.
A debt backed by physical assets. The repayment of the interest and principal can be provided by these assets in the case of default.
Securities Act of 1933
Federal legislation designed to protect the public in the issuance and distribution of securities by requiring registration of a security with the SEC and full disclosure of accurate information about an issue.
Securities and Exchange
A federal agency created in the Securities Exchange Act of 1934 to oversee the Securities Act of 1933. The SEC promotes full disclosure and fair practices by the securities market.
Securities Exchange Act of 1934
Federal legislation created to provide governance of securities transactions in the secondary market and to regulate exchanges and broker dealers in order to protect the investing public.
Collateral pledged by a bond issuer (debtor) to an investor (lender) to secure repayment of the loan.
Bonds and other debt obligations, fixed-rate capital securities and preferred stock that are considered senior to common stock within an entity's capitalization structure.
Sequential Pay REMIC
The most basic type of REMIC, in which all tranches receive regular interest payments, but principal payments are directed initially only to the first tranche until it is completely retired. Once the first tranche is retired, the principal payments are applied to the second tranche until it is fully retired and so on.
A bond issue with stated maturity dates spread over several consecutive years.
Collection and pooling of principal, interest, and escrow payments on mortgage loans and mortgage pools, as well as certain operational mortgage loans and mortgage pools, as well as certain operational procedures such as accounting, bookkeeping, insurance, tax records, loan payment follow-up, delinquency loan follow-up and loan analysis. The party providing the servicing receives a servicing fee.
The amount retained by the mortgage servicer from monthly interest payments made on a mortgage loan.
The date on which a security is delivered in exchange for funds.
An inventory position that reflects the sale of bonds that are not owned at the time of the sale.
A sale of securities not owned by the seller at the time of the transaction. This sale requires the purchase of the securities at a time in the future to cover the trade. A seller is usually expecting the price of the security to decline when a short sell is made.
Debt with a maturity of less than one year.
SIFMA (Securities Industry and Financial
An association that represents firms in financial markets. They are committed to enhancing the public’s trust and confidence in the markets.
A bond with a sinking fund.
A fund where excess revenues are contributed by the issuer in order to retire the outstanding bonds in accordance with the sinking fund schedule. In the case of a Mandatory Sinking Fund(MSF), bonds WILL be called according to the schedule provided.
Single Call Bond
These bonds are only callable at one specific future date.
SMM Single Monthly
The percentage of outstanding mortgage loan principal that prepays in one month.
Secondary Mortgage Market Enhancement Act of 1984
Securities that are both ultimately secured by a first-lien mortgage loan and rated in one of the top two rating categories by at least one nationally recognized statistical rating.
Special Assessment Bond
A bond secured by a special tax or other source of revenue, such as a gasoline tax.
Special Obligation Bonds
Bonds that are secured with a specific source of revenues.
Special Tax Bond
A bond secured by a special tax, such as a gasoline tax.
The difference between the bid and asked prices for a bond.
Standard Prepayment Model
A model based on historical mortgage prepayment rates that is used to estimate prepayment rates on mortgage securities. The model is based on the Constant Prepayment Rate (CPR), or the amount of outstanding principal that is prepaid in a month.
State (Municipal Bonds Only)
The state in which the bond was issued.
A bond with a coupon rate that increases periodically, until it is called or matures.
Removing the coupons from a bond and then selling parts separately as a zero coupon or and interest only product.
Securities derived from or based on a single security, a basket of securities, an index, a commodity, a debt issuance and/or a foreign currency.
Securities whose cash flow characteristics depend upon one or more indices or that have embedded forwards or options or securities where an investor's investment return and the issuer's payment obligations are contingent on, or highly sensitive to, changes in the value of underlying assets, indices, interest rates or cash flows.
Subject to AMT designates whether a municipal issue will be subject to Federal Alternative Minimum Income Tax.
Indications of offerings that are contingent on availability and / or other criteria, and must be verified before order execution can take place.
Securities with a promise to pay that cannot legally be fulfilled until payments on certain other obligations have been made.
Support (Also known as Companions)
A class of tranche found in a planned amortization class (PAC) bond that is responsible for protecting the PAC tranche from both contraction and extension risk. The companion bond is designed to absorb excess principal payments during times of high prepayment speeds and defer receiving principal payments during times of low prepayment speeds.
A principal-only security structured as a companion bond.
A floating-rate REMIC tranche whose rate is based on a formulaic relationship to a representative interest rate index.
Securities which are issued by supranational entities such as the International Bank for Reconstruction and Development (IBRD issues), International Finance Corporation (IFC issues), the North American Development Bank, etc. Supranational securities are not obligations of U.S Government agencies.
Optional redemption feature on a debt instrument allowing the beneficiary of the estate of the deceased to put (sell) the bond (back to the issuer) in the event of the death or legal incapacitation of the holder of the debt instrument. Also known as an Estate Feature or Death Put.
The exchange of one security for another to change the maturity, quality of issue, or the investment objectives.
A code representing a particular security listed on an exchange or otherwise publicly traded.
TAC Tranche - Targeted Amortization
Targeted amortization class tranche. A TAC tranche uses a mechanism similar to a sinking fund to determine a fixed principal payment schedule based on an assumed prepayment rate. The effect of prepayment variability that is removed from the TAC tranche is A type of credit derivative that is similar to a planned amortization class (PAC) in that it protects investors from prepayment; however, it is structured differently than a PAC. TACs protect investors from a rise in the prepayment rate or a fall in interest rates. They do not protect from a fall in the prepayment rate like PACs.
The action by which an instrument is tendered and received by the purchaser.
Bonds with interest that is taxable on the federal level and possibly the state and local level as well.
Indicates the state of issuance for tax-exempt offerings by state code.
Indicates whether income from the bond is subject to federal, state, and/or the Alternative Minimum Tax (AMT).
The weekly average auction rate of the three-month Treasury bill stated as the bond equivalent yield.
Bonds issued by companies in the Telephone sector, which may include regional and long distance telecommunication service providers.
A large municipal bond issue with all the bonds maturing on a single date.
A financing done to meet specific cash-flow needs for a specific period of time.
Commonwealth countries associated with the US such as Puerto Rico or unincorporated territories of the US such as Guam, who issue municipal debt.
A condition in the secondary market with active trading and narrow spreads between asked and bid prices.
Treasury Inflation Protected Securities are a special type of Treasury note or bond that offers protection from inflation. Coupon payments and underlying principal are automatically increased to compensate for inflation by tracking the consumer price index (CPI).
Total Bonded Debt
The total amount of debt outstanding for a state or local government regardless of the purpose of the debt.
The return on an investment, including income from dividends and interest, as well as appreciation or depreciation in the price of the security, over a given time period.
The official date on which a bond transaction occurs.
A person or firm engaged in buying or selling bonds.
A portion of a deal or structured financing. This portion is one of several related securities that are offered at the same time but have different risks, rewards and maturities.
The unique two-character name of a CMO tranche. The Issuer, Deal Number, and Tranche Name uniquely identify every CMO.
A party appointed by an issuer to maintain records of securities owners, to cancel and issue certificates and to address issues arising from lost, destroyed or stolen certificates.
Bonds issued by companies in the Transportation sector, which may include railroads, truckers, and air freight.
A U.S. Government security with a maturity of one year or less. T-Bills are purchased at a discount to the full face value, and the investor receives the full value when they mature. The difference or "discount" is the interest earned. T-Bills are issued in denominations of $10,000 (auction) and $1,000 increments thereafter.
Long-term obligations of the U.S. Government backed debt. that mature in excess of ten 10 years. Interest is paid semi-annually, and the bonds can be purchased in minimum denominations of $1,000 or multiples thereof.
Treasury Investment Growth Receipt
A US Treasury bond that has been stripped of its coupons, with ownership of individual coupons, or of bond principal sold at a discount as a zero coupon. All interest is paid at maturity. They are backed by the US Government.
U.S. Government debt obligations that are available for terms of one to 10 years with a fixed interest rate. Interest is paid twice a year, or semiannually, and the bonds can be purchased in denominations of $1,000 or multiples thereof.
U.S. Treasury zero coupon fixed income securities standing for Separate Trading of Registered Interest and Principal of Securities. These securities are sold at a discount, and they redeem for their full face value at maturity.
The market interest rate at which the terms of a security might change. Triggers are common on index amortization notes and range securities.
An entity designated by the issuer as the custodian of funds and official representative of bondholders.
A floating-rate note with no stated maturity date.
All structured products provide a return based on the performance of some underlying reference asset or index. The most popular underlyings used are single stocks, domestic and international equity indices, commodities, and currencies. Other underlying reference assets can be baskets of individual shares, indices of house prices, the prices of managed funds including hedge funds, and a variety of other financial assets.
In the case of a security for which credit enhancement or insurance has been obtained, the underlying rating is assigned by a rating agency to such security without regard to credit enhancement or assigned to other securities of the same issuer having the same features and security structure but without the credit enhancement.
Unlimited Tax Bond
A bond secured by the pledge of taxes that are not limited by rate or amount.
An improved credit rating issued by a rating company.
Bonds issued by companies in the utility sector, which may include electric, gas & water utility companies.
The propensity of a security's price to rise or fall.
Weighted Average Coupon
The weighted average interest rate of the underlying mortgage loans or pools that serve as collateral for a security, weighted by the size of the principal loan balances.
Weighted Average Loan Age
A dollar-weighted average measuring the age of the individual loans in a mortgage pass-through or pooled security, such as Ginnie Mae or a Freddie Mac security. The WALA is measured as the time in months since the origination of the loans, with the weighting based on each loan's size in proportion to the aggregate total of the pool..
Weighted Average Maturity
The weighted average of the time until all maturities on mortgages in a mortgage-backed security (MBS). The higher the weighted average to maturity, the longer the mortgages in the security have until maturity. Also known as "average effective maturity".
In a REMIC bond, the period of time between the expected first payment of principal and the expected last payment of principal.
The income return on an investment expressed on an annual percentage. The basis on which a bond is priced and sold. It reflects the value of the bond giving consideration to the length of time to maturity, credit quality of the issuer/guarantor, and general market conditions.
A line tracing relative yields on a type of security over a spectrum of maturities ranging from three months to 30 years.
The difference in yield between two bonds or bond indices.
Yield to Call (YTC)
The yield of a bond or note if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. The calculation of yield to call is based on the coupon rate, the length of time to the call date and the market price.
Yield to Maturity (YTM)
The rate of return anticipated on a bond if it is held until the maturity date. YTM is considered a long-term bond yield expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupons are reinvested at the same rate. Sometimes this is simply referred to as "yield" for short.
Yield to Par Call
The yield of a bond or note if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. The calculation of yield to call is based on the coupon rate, the length of time to the call date and the market price.
Yield to Worst (YTW)
The most conservative yield calculation, from the investors perspective, based upon current market pricing. The lowest of all yield calculations to optional call dates and/or maturity.
A bond where periodic interest payments (coupon payments) are not made during the life of the bond. Most often purchased at a discount to face value the return of the bond (yield) is determined by the difference between the discounted purchase price and redemption value (face value) at maturity.
A special type of bond class in a sequential pay collateralized mortgage obligation. This class of bond does not receive any interest or principal payments until all other tranches have been completely paid off. In a Z-tranche, the interest that is not paid is accrued and added to the principal for future interest calculation purposes.
The main purpose of the Z-tranche is to speed up the maturity of the senior tranches by disbursing payment that the Z-tranche was suppose to receive to the higher priority tranches. Investors that possess long-term liabilities or those who worry about reinvestment risk would benefit from investing in a Z-tranche bond