Bonds & rates

• Bond fundA fund holding many bonds, offering diversification but no fixed maturity date.
• Break-even inflationThe inflation rate at which a conventional bond and an inflation-linked bond would perform identically.
• Callable bondA bond the issuer can repay early, usually when interest rates have fallen.
• Capital structureThe ranking of everyone who funded a company, deciding who gets paid first if it fails.
• Convertible bondA bond that can be exchanged for a set number of the issuer’s shares.
• ConvexityHow duration itself changes as yields move — the curvature in a bond’s price-yield relationship.
• CouponThe fixed interest a bond pays each year, expressed as a percentage of its face value.
• CovenantA condition in a loan agreement that the borrower must keep to.
• Credit ratingAn agency’s assessment of how likely a borrower is to repay, on a lettered scale.
• Credit riskThe risk that a borrower fails to make the payments it promised.
• Credit spreadThe extra yield a corporate bond pays over a government bond of the same maturity.
• Current yieldA bond’s annual coupon divided by its current market price.
• DefaultA borrower failing to make a payment, or breaching a term of the debt agreement.
• Discount and premiumA bond trading below face value is at a discount; above face value, at a premium.
• DurationHow much a bond’s price moves when interest rates change, expressed in years.
• Face valueThe amount a bond repays at maturity, and the amount its coupon is calculated on.
• Fallen angelA bond downgraded from investment grade to high yield.
• High-yield bondDebt rated below investment grade, paying more because default risk is materially higher.
• Inflation-linked bondsGovernment bonds whose principal and coupons rise with an official inflation index.
• Interest-rate riskThe risk that rising interest rates reduce the market value of bonds you already hold.
• Inverted yield curveWhen short-term bonds yield more than long-term ones — historically a recession warning.
• Investment gradeDebt rated BBB− or better, considered to have a relatively low risk of default.
• Modified durationDuration adjusted for the bond’s own yield, giving a direct estimate of price sensitivity.
• Municipal bondDebt issued by local or state government, often with tax advantages for domestic investors.
• Recovery rateHow much of a defaulted bond’s face value holders eventually get back.
• Term premiumThe extra yield investors demand for lending long rather than rolling short-term loans.
• Treasury billVery short-term government debt, issued at a discount and repaying face value within a year.
• Yield curveA chart of government bond yields across maturities, from months to decades.
• Yield to maturityThe total annual return from holding a bond to maturity, counting coupons and any price gain or loss.
• Zero-coupon bondA bond that pays no interest and is instead issued well below face value.

Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.