Buy bonds to secure a steady income stream or to spread your investment risk.
Interest accrued from the issue date or the last coupon date until the security settlement date Bonds accrue interest from the date of their most recent interest payment until the date of their next interest payment. On the next payment date, the buyer of the security pays the seller the principal plus any accrued interest.
The inevitable rise to the maturity or face value of a fixed-income investment over time.
The amount of a bond issue's principal that will be due at maturity
Interest Rate on Deposits at Banks
The equivalent of the discount rate in Canada The Bank of Canada's overnight lending rate to financial institutions is at least this much. Since December of 2000, the Bank has used a schedule of eight annual dates to announce the target level of the Bank Rate, and thus the overnight rate.
Point of departure
1100 of a percentage Typically, it is used to justify shifts in bond yields. If the yield were to increase by 12 basis points, the result would be a yield increase of 0. Twelve percent (e g 6 24 % versus 6 % Adding 12 percentage points brings the total to 36%.
Bonds that are used as a benchmark to measure something else Canadian government bonds are issued by the Bank of Canada at predetermined intervals of time. The presence of the Bank of Canada issues simplifies bond pricing for issuers because reliable market yields can be used as references or benchmarks.
Cost of Bid
A buyer's or a seller's highest acceptable offer price
The number of securities (at par value) that the highest bidder is willing to buy.
The yield at which a security is purchased by the highest bidder
A document evidencing the existence of a debt owed by a borrower to an investor at a specified interest rate and for a specified period of time. The debt is settled after that time frame has passed. There must be collateral for a loan in order for a bond to be valid under the law. In common usage, the term refers to any form of unsecured or collateralized debt for a set period of time.
Demand for purchase
A request to buy a security
An issue of bonds that can be redeemed by the issuer before they mature. There must be a certain set of conditions
The Cost: Please Inquire
Cost to the issuer of repurchasing a bond that has a call provision.
Securities issued by a chartered bank that pay a fixed interest rate One thousand dollars is the typical low-end purchase threshold, and terms range from one to seven years.
Non-financial corporations' short-term debt instruments They can only be held for a maximum of a year.
Debenture with a Conversion Option
A bond that can be exchanged for shares of common stock at a predetermined price.
The percentage of the bond's face value (in dollars) that the issuer promises to pay in interest each year. Part of a bond that guarantees the buyer periodic interest payments at a set rate Annual rate is quoted but payments are made twice a year.
Interest payment evidence that is attached to a bond.
The CUSIP number
To standardize the identification of municipal, government, and corporate securities, the American Bankers Association sponsored the creation of the Committee on Uniform Security Identification Procedures.
In contrast to a broker, a dealer always acts as the principal, making purchases and sales on his own behalf.
A loan that doesn't have any collateral or a lien on any specific assets but is instead backed by the issuer's general creditworthiness
Abbreviated form of a problem's name used to draw attention to it Typically, Issuer_Coupon_Maturity (i.e., the protocol e CAN 8 75 12/05)
Database of relevant information Information such as the CUSIP, Description, Bid Price, Ask Price, Yield, Size, Maturity, Coupon, and Credit Ratings (CBRS, Moody's, and S&P) are included.
Indicative of how much a bond is selling for less than its face (or maturity) value.
Stocks at a discount
Discounted money market instruments that pay no interest and are redeemed at par upon maturity; e. g Debentures issued by the U.S. Treasury
Slope of yields falling
This is a term for an abnormal yield curve, in which the yield increases as the maturity date gets closer to the present. Instances of this kind usually arise when the central bank is actively trying to end an inflationary trend.
How long your typical fixed-income investment is expected to last Despite the name, ten-year bonds are not truly ten-year bonds. The cumulative effect of interest payments reduces expected duration. Interest payments have a shorter time horizon than principal payments. There are no cash flows to worry about for the duration of a zero coupon bond, so the maturity and duration are the same. This is a risk measurement term.
Issuances with a specified maturity date that, under certain circumstances, grant their holders the right to request an additional maturity extension from the issuer
Value of a security's underlying principal The price of a bond as printed on the certificate. This is typically the bond's face value when it matures. It doesn't reflect the value in today's market.
Yield curve is flat
This describes a yield curve where all maturities have the same yield. If a bond's settlement date is the same as its coupon payment date, or if the issuer is unable to make interest payments, then the bond is said to be "flat," meaning that it is trading with no accrued interest.
Yield curve with a hump
The yields on one or more maturities are significantly higher or lower than the yields on the other maturities due to an anomaly in the yield curve.
The borrower (government or company) whose debt to bondholders must be repaid.
Security with a coupon payment
A bond whose interest is paid only if and when the issuer earns it.
Investment brokers keep a stock of "shelf products" backed by their own capital and sold at competitive prices to serve their retail and institutional clients.
Dealers in the money market who are authorized to participate in the weekly Treasury bill auction
Put a cap on it
A price-capped order
Commitment over the long haul
One with a maturity date further out than ten years
Generate a marketplace
When a dealer quotes bid and offered prices at which he is willing to buy and sell, he is said to be making a market.
The Establishment of Market Order
A buy or sell order that is based on the current market price It's critical that it be carried out as soon as possible and for as little money as possible.
Time of expiration
The security's maturity date is the date on which the issuer must repay the holder the principal borrowed and any accrued interest.
Financial commitment for the intermediate term
One that reaches full maturity in three to ten years
Market for Exchange of Currency
A wholesale financial market for short-term debt instruments (bills, commercial paper, bankers' acceptances, and corporate paper) with a maturity of less than a year.
Grade from Moody's
Credit Analysis Technique A benchmark for evaluating bond values
Municipal bonds are issued by municipalities and their agencies.
Municipal short-term notes are issued by governments in exchange for future revenue streams such as tax collections, bond sales, and other sources.
The lowest price at which a dealer is willing to sell the securities
The number of a security's shares being sold at par value
Return on offer.
Price per yield at which a security is being sold
In the process of taking off
A bond issue that is not considered a "benchmark issue" It may be unattractive to trade because of a high or low coupon, a small issue size, a high concentration of ownership, or some other factor. For such an issue, the bid-ask spread will widen because brokers are less likely to stock it or cannot move it quickly once they do.
An order is a request to purchase or sell a financial instrument.
Sold in Stores
What this translates to in essence is "decentralized." The bond market is not centered around a single location like the stock exchange; instead, transactions take place verbally or electronically between markets.
The Full Cost
Upon maturity, the issuer of a debt security agrees to redeem the security for its face value.
Quantitatively, the PAR value
A bond's stated face value. It has nothing to do with the similar expression used in the context of stock markets. "Face Value," "Par," or "FV"
The yield curve is rising
This is the standard yield curve, in which the yield increases with increasing time until maturity.
The sum of money that one or more people are ready to spend or receive in exchange for a security. Typically, costs are denoted per one hundred dollars of Par Value.
To what extent you lend On the bond's due date, you'll receive this amount back.
Provincial government and agency debt securities
An expression of desire to acquire or dispose of
There is a major distinction between this and callable bonds, though. A redeemable bond, typically issued by corporations, can be "called" by the issuer, but not for the issuer's financial benefit. Instead, the bond issue can be retired early if the company has extra cash on hand or if there is a change in the company's corporate structure.
Chance of reinvestment
You can divide the potential dangers into two categories: The first is that it is impossible to ensure that all interest payments will be reinvested at the same rate, so the yield to maturity quoted on a bond may not actually be realized. A second scenario where you might face this danger is if all of your investments are due to mature at the same time and interest rates have recently dropped significantly.
The sum of principal that remains after interest has been deducted
A security that allows the holder to return their holdings for face value before the final maturity date, under certain conditions
Indication of a desire to sell
A request to dispose of a particular security.
Paid-in-full Date of Settlement
Information about the month, day, and year that the deal will close Settlement for Equities is customarily three business days (or "T 3") after the trade date.
Securities with a Fixed Income Settlement:
Commercial Paper and US and Canadian Treasury Bills: T 1
Government of Canada Bonds with less than three years remaining until maturity (T 2)
All Other Strip Bonds and Fixed Income Instruments: T 3
Short selling is the practice of selling a security that one does not own in the hope that its price will go down or as part of an arbitrage. In order for a short sale to be legal, the sold securities must be bought back at some point.
Indentures governing corporate issues typically call for the issuer to contribute annually to a sinking fund, from which the proceeds are used to retire bonds from the issue at random.
Variation between a security's bid and offer price
Yield spread is the price or yield difference between two securities with different types or maturities.
The spread in underwriting is the difference between the issuer's realized price and the investor's paid price.
Variation in two rates or prices A term used by commodity traders to describe the foundation
A bond from which the coupons have been removed, resulting in a series of zero coupon issues with the same face value and original maturity date as well as the interest payment dates of the coupons as their maturity dates. Usually offered at a reduced price
Please see Section 2 for further details. 11 in the Terms and Relationship Disclosure Document
A collection of data for analysis Information such as the CUSIP, Description, Bid Price, Offer Price, Bid Yield, Offer Yield, Bid Size, and Offer Size are all included.
A deal is a type of exchange. There are two parties involved in a trade, along with a price and an amount.
Commercial Exchange Date
The date on which a deal first begins to be worked. Settlement dates can be different from trade dates.
Invoice from the Treasury
Government discount instruments are sold at auction once a week. The typical initial maturities of T-bills are 13 weeks (three months), 26 weeks (six months), and 52 weeks (one year).
Competitively Opposite Market
A market where the bid and offer prices for the base trading unit are displayed
Exchange that works in both directions
A market where buyers and sellers both post their prices
An expression of the bond's price volatility relative to a change in yield.
An annual percentage rate that indicates how much interest the investor will make or lose on their investment over the security's entire term.
Inflation-adjusted yield curve
Differences in credit quality across time and how they relate to the different maturities Canada's bond yield curve serves as the industry standard there. See Negative Yield Curve, Flat Yield Curve, Humped Yield Curve, and Positive Yield Curve for more information on the various types of yield curves.
Progress toward full maturity
Rate of return earned by an investor on a debt security over the full holding period, including interest payments and any capital gains or losses. Return on investment (ROI) is the amount of money an investor makes if they hold a security until maturity and reinvest all coupons as they are received.
Bonds with no interest payments
An interest-free bond is one that never yields any money. Zero-Interest Bonds (Zeros) trade at a discount to their face value. Return on investment, assuming the bond is held until its maturity date, is represented by the discount. Interest payment dates from a regular issue bond issue are typically used to create the bonds.
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