A+/A1 are middle-tier credit ratings assigned to long-term bond issuers by Moody's and S&P, respectivel.

A+ /A1 refers to two ratings issued to long-term bonds and bond issuers by the competing credit rating agencies Standard & Poor's (S&P) and Moody's respectively. Both A+ and A1 are six rankings above the cutoff that separates investment-grade debt from high-yield, or non-investment-grade, debt, which carries ratings of Baa1/BBB+, Baa2/BBB, Baa3/BBB-, or even lower. The A+/A1 rating signifies that the issuer or carrier has stable financial backing and ample cash reserves. A+ /A1 refers to two ratings issued to long-term bonds and bond issuers by the competing credit rating agencies Standard & Poor's (S&P) and Moody's respectively. Both A+ and A1 fall in the middle of the investment-grade category, indicating some but low credit risk. The credit ratings assigned by the various rating agencies are based primarily upon the insurer's or issuer's creditworthiness; in a sense, they are a quantified assessment of the creditworthiness of a borrower.

A+/A1

Aa2 is the third-highest long-term credit rating that Moody’s assigns to fixed income securities that are of high quality with very low credit risk.

Aa2 is the third-highest long-term credit rating that ratings agency Moody’s assigns to fixed-income securities, like bonds, that are of high quality with very low credit risk. Aa2 is the third-highest long-term credit rating that ratings agency Moody’s assigns to fixed-income securities, like bonds, that are of high quality with very low credit risk. Aa2 is the third-highest long-term credit rating that Moody’s assigns to high-quality fixed-income securities with very low credit risk. Essentially, the higher the rating, the more likely the issuer is to meet their financial commitments and the lower the risk of default. In the Moody's scale, Aa2 is just below Aaa and Aa1, but is above everything else.

AA+ is the second-highest bond rating assigned by rating agency S&P while Aa1 is the equivalent from Moody's. Both signify a low-risk investment.

AA+ and Aa1 are the second-highest ratings that can be assigned to debt by Standard & Poor's Financial Services (S&P) and Moody's Investors Service, respectively. Investment-quality bonds are rated by S&P as AAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB, and BBB-.
Moody's equivalent ratings, in descending order of quality, are Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, and Baa3. Moody's rating system is similar to that of S&P.
Long-term investment-quality bonds, in descending order of quality, are rated Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, and Baa3. The investment-quality bonds, in descending order of quality, are rated AAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB, and BBB-. Short-term bonds of investment quality are rated A1, A2, or A3, in descending order of quality.

AA+ Vs. Aa1: What's the Difference?

AAA is the highest possible rating assigned to the bonds of an issuer by credit rating agencies such as Standard & Poor's and Fitch Ratings.

Fitch Downgrades GE and GE Capital to 'BBB'; Outlook Stable

Johnson & Johnson -- Moody's affirms J&J's Aaa rating; negative outlook

Investor Relations: Frequently Asked Questions

AAA is the highest possible rating that may be assigned to an issuer's bonds by any of the major credit rating agencies. Rather than restricting their fixed income exposure to AAA-rated bonds, investors should consider balancing those investments with higher income-producing bonds, such as high-yield corporates. Municipal bonds can be issued either as revenue bonds or as general obligation bonds—with each type relying on different sources of income. Since AAA-rated bonds are perceived to have the smallest risk of default, these instruments tend to offer investors the lowest yields among bonds with similar maturity dates. AAA is the highest possible rating that may be assigned to an issuer's bonds by any of the major credit rating agencies.

An accelerated return note (ARN) is a debt instrument offering potentially higher returns linked to the performance of a reference index or stock.

An accelerated return note (ARN) is a short- to medium-term debt instrument which offers a potentially higher return linked to the performance of a reference index or stock. An accelerated return note (ARN) is a type of structured investment product (SIP) that offers a potentially higher return that is linked to the performance of a specific reference index or stock. The S&P 500 is at 2,500 in two years: The S&P has had a return of 25% while twice the S&P 500 return is 50%, and the maximum return on the ARN is 30%. An accelerated return note (ARN) is a short- to medium-term debt instrument which offers a potentially higher return linked to the performance of a reference index or stock. The total return of an accelerated return note (ARN) is usually capped and they do not offer any downside protection.

Accelerated Return Note (ARN)

Accretive is the process of accretion, which is the growth or increase by gradual addition, in finance and general nomenclature. 

In both finance and in general lexicon, the term "accretive" is the adjective form of the word "accretion", which refers to gradual or incremental growth. \--In corporate finance, accretive acquisitions of assets must add more value to a company, than the costs of acquiring the target entity,
\--Accretive deals can occur if acquired assets are purchased at a discount to their perceived current market value.
\--In general finance, accretive investments refer to any security that is purchased at a discount. If a person purchases a bond with a value of $1,000, for the discounted price of $750, with the understanding that it will be held for 10 years, the deal is considered accretive, because the bond pays out the initial investment, plus interest. This can be due to the fact that the newly-acquired assets in question are purchased at a discount to their perceived current market value, or if the assets are expected to grow, as a direct result of the transaction. By definition, in corporate finance, accretive acquisitions of assets or businesses must ultimately add more value to a company, than the expenditures associated with the acquisition.

Accretive

Accrual bond defers periodic interest payments until maturity, much like a zero coupon bond, except the coupon rate is fixed to the principal value.

Publication 550 (2019), Investment Income and Expenses

An accrual bond defers periodic interest payments usually until maturity, much like a zero coupon bond, except the coupon rate is fixed to the principal value. An accrual bond's interest is added to the principal balance of the bond and is either paid at maturity or, at some later date, when the bond begins to pay both principal and interest based on the accrued principal and interest to that point. Although interest is not paid throughout the bond’s life, the Internal Revenue Service (IRS) still requires holders of accrual bonds to report the imputed interest on the bond as interest income for tax purposes. An accrual bond defers periodic interest payments usually until maturity, much like a zero coupon bond, except the coupon rate is fixed to the principal value. An accrual bond defers periodic interest payments usually until maturity, much like a zero coupon bond, except the coupon rate is fixed to the principal value.

Accrual Bond

Accrued interest adjustment lowers a fixed-income security buyer's taxable interest income by reducing the extra interest amount that is paid to them.

Accrued interest adjustment lowers a fixed-income security buyer's taxable interest income by reducing the extra interest amount that is paid to them. Accrued interest adjustment lowers a fixed-income security buyer's taxable interest income by reducing the extra interest amount that is paid to them. Accrued interest adjustment lowers a fixed-income security buyer's taxable interest income by reducing the extra interest amount that is paid to them. The accrued interest adjustment decreases the taxable interest income by deducting the extra amount of interest that is paid to the new owner of the fixed income security. Accrued interest is the total interest that has been amassed since the last coupon payment date and is the amount that is owed to the owner of a convertible bond or other fixed-income security.

Accrued Interest Adjustment

Accrued interest refers to the interest that has been incurred on a loan or other financial obligation but has not yet been paid out.

In accounting, accrued interest refers to the amount of interest that has been incurred, as of a specific date, on a loan or other financial obligation but has not yet been paid out. In this scenario, to record the extra amount of interest revenue that was earned from the 21st to the 30th of the month, the calculation would be as follows:
(7.5% x (10 / 365)) x $20,000 = $41.10
The amount of accrued interest for the party who is receiving payment is a credit to the interest revenue account and a debit to the interest receivable account. But since you paid $16.67 in accrued interest when you purchased the bond, the net interest received by you is $8.33 ($25 - $16.67), which is precisely the amount of interest you should have received for the 60 days that you owned the bond until the next coupon payment (September 30 to December 1). Accrued interest can either be in the form of accrued interest revenue, for the lender, or accrued interest expense, for the borrower. The term accrued interest also refers to the amount of bond interest that has accumulated since the last time a bond interest payment was made.

Accrued Interest  & Example

Accrued market discount is the gain in the value of a discount bond expected from holding it for any duration until its maturity.

Accrued market discount is the gain in the value of a discount bond expected from holding it for any duration until its maturity. To put another way, the gain realized on the disposition of a market discount bond must be recognized as interest income to the extent of the accrued market discount, and any remaining gain will be capital if the bond is a capital asset in the hands of the holder. The accrued market discount is the expected gain to be earned on a discount bond by holding it up until maturity, whereupon it should rise to its face value. Accrued market discount is the gain in the value of a discount bond expected from holding it for any duration until its maturity. The difference between the discounted price for which the bond is sold and its face value at maturity ($1,000 - $935 = $65) is the accrued market discount and represents the return on investment to the bondholder.

Accrued Market Discount

An accumulation bond is a bond sold at a discount where the bond issuer is not required to make semi-annual interest payments.

An accumulation bond is one sold at a discount, known as an original issue discount (OID). An accumulation bond, also known as a zero-coupon discount bond, is so named because the value of the bond accumulates over time. Investors in accumulation bonds should be aware that accumulation bonds are at risk of suffering steep price declines during times of rising interest rates. Investors in accumulation bonds should be aware, however, that accumulation bonds are at risk of suffering steep price declines during times of rising interest rates. An original issue discount (OID) is a discount from par value at the time a bond or debt instrument is issued.

Accumulation Bond

Active bond crowd is a term used to describe frequent traders of active bonds on the New York Stock Exchange.

SIFMA Insights Electronic: Trading Market Structure Primer

Active bond crowd is the name given to traders who are members of the New York Stock Exchange (NYSE) and engage in high volume trading of active bonds. As noted by the Securities Industry and Financial Markets Association (SIFMA), higher trade volumes for a specific security often mean higher liquidity, better order execution and a more active market for connecting a buyer and seller.﻿﻿ The most actively traded corporate bonds also may reveal where bond investors see the greatest opportunities and risks in terms of industries and issuers.
The opposite of the active bond crowd is the inactive bond crowd, a term used to describe a group of exchange members who buy and sell bonds that are infrequently traded. Generally, the active bond crowd will be able to demand better prices for buying and selling active bonds, which are corporate bonds or other fixed-income securities frequently traded at large volumes on the NYSE. The active bond crowd on the New York Stock Exchange creates liquidity and can affect the price of bonds traded on the market because they typically account for the largest volume of transactions in the market. Active bond crowd is the name given to traders who are members of the New York Stock Exchange (NYSE) and engage in high volume trading of active bonds.

Active Bond Crowd

Advance refunding is the withholding of a new bond issue's proceeds for more than 90 days before using them to pay off an outstanding bond issue.

Legislation Affecting Tax-Advantaged Bonds

Advance refunding refers to the withholding of a new bond issue's proceeds for longer than 90 days before using them to pay off (refund) an outstanding bond issue's obligations. Advance refunding is most often used by governments seeking to postpone their debt payments, rather than having to pay off a large amount of debt when it's due.
Municipalities typically use advance refunding to lower borrowing costs and to take advantage of lower interest rates.
In corporate finance and capital markets, refunding is the process where a fixed-income issuer retires some of their outstanding callable bonds and replaces them with new bonds, usually at more favorable terms to the issuer as to reduce financing costs. The new bonds are used to create a sinking fund to repay the original bond issues, known as refunded bonds.
Advance refunding refers to the practice of taking the funds received from a new bond issuance to pay off a prior issue's debt. Advance refunding refers to the withholding of a new bond issue's proceeds for longer than 90 days before using them to pay off (refund) an outstanding bond issue's obligations. The bond issuer places the proceeds from the sale of the newer issue (refunding bond) in an escrow account until they call the older (refunded bond) issue.

Advance Refunding

After-tax basis is used to compare the net after-tax returns on taxable and tax-exempt bonds to gauge which had a higher yield.

An after-tax basis is used to compare the net after-tax returns on taxable and tax-exempt bonds to gauge which has a higher yield. An after-tax basis is used to compare the net after-tax returns on taxable and tax-exempt bonds to gauge which has a higher yield. After-tax bases compare the net after-tax returns on both taxable and tax-exempt bonds to gauge which has a higher yield. Taxable bonds, such as corporate bonds, may offer higher returns than tax-exempt bonds, such as municipal bonds. Most corporate bonds may state a higher yield than other tax-exempt bonds since the investors have to take on additional risk.

After-Tax Basis

An agency debenture is debt issued at a fixed or variable interest rate by a federal agency or a government-sponsored enterprise for financing purposes.

Fannie Mae's and Freddie Mac's Financial Problems

An agency debenture is debt (bonds) issued at a fixed, or variable, interest rate by a United States federal agency or a government-sponsored enterprise (GSE), for the purposes of procuring funds to finance their activities, which usually entails purchasing mortgages from various lenders. Federal agency debentures are fully guaranteed and the interest payments are, usually, tax-exempt, while GSEs are implicitly guaranteed and their interest payments tend to be taxable.
Agency debentures played a large role in the financial crisis of 2008, resulting in significant reforms to government-sponsored entities (GSEs). Common government-sponsored entities (GSEs) that issue agency debentures include Fannie Mae, Freddie Mac, Farmer Mac, and Ginnie Mae. An agency debenture is debt (bonds) issued at a fixed, or variable, interest rate by a United States federal agency or a government-sponsored enterprise (GSE), for the purposes of procuring funds to finance their activities, which usually entails purchasing mortgages from various lenders. The most common government-sponsored entities (GSEs) that issue agency debentures are Fannie Mae, Freddie Mac, Farmer Mac, and Ginnie Mae.

Agency Debenture

An agency bond is a security issued by a federal government department or by a government-sponsored enterprise such as Freddie Mac or Fannie Mae.

An agency bond is a security issued by a government-sponsored enterprise or by a federal government department other than the U.S. Treasury. Federal government agency bonds and government-sponsored enterprise bonds pay slightly higher interest than U.S. Treasury bonds. GSE agency bonds do not have the same degree of backing by the U.S. government as Treasury bonds and government agency bonds. There are two types of agency bonds, including federal government agency bonds and government-sponsored enterprise (GSE) bonds. Government-sponsored enterprise bonds do not have the same degree of backing by the U.S. government as Treasury bonds and other agency bonds.

Agency Bond

Agio can refer to a bond premium (when a bond’s market value is greater than its par value) or a fee paid for a foreign exchange transaction.

Agio can refer to a bond premium (when the market value of the bond is greater than its par value) or a fee paid for a foreign exchange transaction. Agio can refer to a bond premium (when the market value of the bond is greater than its par value) or a fee paid for a foreign exchange transaction. Agio can refer to a bond premium (when a bond's market value is greater than its par value) or a fee paid for a foreign exchange transaction. Agio can be defined as the difference between a bond's intrinsic value and market value. Because bonds are often traded on international markets, the agio premium is used to describe the premium to exchange currencies.

Agio

An American Callable Bond can be redeemed by the issuer at any time prior to its maturity and usually pays a premium when the bond is called. 

Bank of America Announces Redemption of Senior Notes

Table of Contents
What Is an American Callable Bond?
Understanding Callable Bonds
Why Callable Bonds Get Called
Risks of American Callable Bonds
American Callable vs. Other Bonds
Example of a Callable Bond In addition to American and European callable bonds, bonds can be offered with the following options:
1.  **Bermuda Call**: The issuer has the right to call a bond on interest payment dates only, starting on the first date the bond is callable. Since investors might have their callable bond redeemed before maturity, investors are compensated with a higher interest rate when compared to the traditional, noncallable bonds. This unconstrained ability of an issuer to call back their bonds is the primary difference between American callable bonds and European callable bonds, which can be called at a predetermined date prior to maturity. Unfortunately, callable bonds pose considerable reinvestment risk to bondholders, who face the prospect of reinvesting the proceeds of a called bond at lower interest rates that generate less interest income.

American Callable Bond

A tax term, the amortizable bond premium refers to the excess price (the premium) paid for a bond, over and above its face value.

Publication 550 (2020), Investment Income and Expenses: Bond Premium Amortization

Publication 1212 (01/2021), Guide to Original Issue Discount (OID) Instruments: Constant Yield Method

The amortizable bond premium is a tax term that refers to the excess price paid for a bond over and above its face value. The premium paid for a bond represents part of the cost basis of the bond, and so can be tax-deductible, at a rate spread out (amortized) over the bond's lifespan. The difference between the bond's current price (or carrying value) and the bond's face value is the premium of the bond. For a bond investor, the premium paid for a bond represents part of the cost basis of the bond, which is important for tax purposes. In a case where the bond pays tax-exempt interest, the bond investor must amortize the bond premium.

Amortizable Bond Premium

An amortized bond is one that is treated as an asset, with the discount amount being amortized to interest expense over the life of the bond. 

An amortized bond is one in which the principal (face value) on the debt is paid down regularly, along with its interest expense over the life of the bond. An amortized bond is one in which the principal (face value) on the debt is paid down regularly, along with its interest expense over the life of the bond. In this way, an amortized bond is used specifically for tax purposes because the amortized bond discount is treated as part of a company's interest expense on its income statement. Under this second type of accounting, the bond discount amortized is based on the difference between the bond's interest income and its interest payable. Second, amortization reduces the duration of the bond, lowering the debt's sensitivity to interest rate risk, as compared with other non-amortized debt with the same maturity and coupon rate.

Amortized Bond

Angel Bond, opposite of 'fallen angels', is slang for an investment-grade bond with a high enough credit rating that banks can legally invest in them.

JCPenney to Reduce Debt and Strengthen Financial Position Through Restructuring Support Agreement

Angel Bond, opposite of 'fallen angels', is slang for an investment-grade bond with a high enough credit rating that banks can legally invest in them. Angel bonds receive investment-grade credit ratings that can range from a high of 'AAA' by Standard & Poor's (S&P) and Fitch and 'Aaa' by Moody’s Investors Service to the minimum investment-grade ratings issued by each service of 'BBB' by S&P and Fitch, and 'Baa' by Moody's. Angel bonds receive investment-grade credit ratings that can range from a high of 'AAA' and 'Aaa' to the minimum investment-grade ratings of 'BBB' and 'Baa'. The latter have “fallen” by seeing their credit ratings descend through the various levels of investment-grade ratings into the below-investment grade area, also referred to as high yield or junk ratings categories. For example, an obligor or a bond issuer for a security with a high credit rating is assessed by the credit rating agency to have a lower likelihood of default than an issuer for a debt security with a lower credit rating.

Angel Bond

The Association of International Bond Dealers (AIBD) consisted of over 530 financial conglomerates and institutions in 60 countries actively trading bonds.

The Association of International Bond Dealers (AIBD) is the former name of a professional association of bond dealers known today as the International Capital Market Association (ICMA).
As of 2021, ICMA members consist of over 600 financial conglomerates and institutions in 60 countries that actively trade bonds. The AIBD became the International Securities Market Association (ISMA) in 1992, and in 2005 merged with the International Primary Market Association to form the International Capital Market Association (ICMA).
Today, the ICMA focuses on a comprehensive range of market practice and regulatory issues that impact all aspects of the functioning of international securities markets.
The Association of International Bond Dealers (AIBD) was formed in Zurich, Switzerland in 1969. The Association of International Bond Dealers (AIBD) is the former name of a professional association of bond dealers known today as the International Capital Market Association (ICMA).
As of 2021, ICMA members consist of over 600 financial conglomerates and institutions in 60 countries that actively trade bonds. In July 2005, ISMA merged with the International Primary Market Association and changed its name to the International Capital Market Association (ICMA). AIBD Ltd., a wholly-owned subsidiary of the AIBD, opened in London to provide data services to the market, and in 1989 the AIBD launched TRAX, a transaction matching, confirmation, and regulatory reporting system.

Association of International Bond Dealers (AIBD)

At par means that a bond, preferred stock, or other debt instrument is trading at its face value. It will normally trade above par or under par.

The term at par means at face value. When a company issues a new bond, if it receives the face value of the security the bond is said to have been issued at par. When securities were issued in paper form, the par value was printed on the face of the security, hence face value. A bond will not trade at par if current interest rates are above or below the bond's coupon rate, which is the interest rate that it yields. A bond, preferred stock, or other debt instruments may trade at par, below par, or above par.

At Par

 An auction rate bond (ARB) is a bond whose interest rate resets regularly through a modified Dutch auction.

Institutional - How Treasury Auctions Work

An auction rate bond (ARB), also known as an auction rate security (ARS), is debt security with an adjustable interest rate. An auction rate bond (ARB), also known as an auction rate security (ARS), is debt security with an adjustable interest rate. An auction rate bond has an interest rate determined through a modified Dutch auction. ARBs are sold through a Dutch auction where the bond is sold at an interest rate that will clear the market at the lowest yield possible. A Dutch auction is a public offering auction structure in which the setting price of the offering is complete after accepting all bids.

Auction Rate Bond (ARB)

Auction rate is the interest rate that will be paid on a specific security as determined by the Dutch auction process. 

Auction rate is the interest rate that will be paid on a specific security as determined by a Dutch auction process. An example of the Dutch auction process would be the competitive bids placed in the auction of Treasury securities, which set the yield or auction rate that all participants eventually receive. An auction rate is an interest rate paid on a specific security as determined by a Dutch auction process. A Dutch auction is a public offering auction structure, in which the price of the offering is set after taking in all bids to determine the highest price at which the total offering can be sold. Auction rate is the interest rate that will be paid on a specific security as determined by a Dutch auction process.

Auction Rate

An authority bond is a security issued by a corporate or government agency to finance the operations of a revenue-generating public business.

An authority bond is a debt security issued by an authority—such as a government agency or a corporation—formed to manage a public enterprise. While municipal bonds tend to finance low-risk infrastructure projects for the community at large, authority bonds may fund projects that have varying degrees of appeal and may not earn the projected revenue. While municipal bonds tend to finance low-risk infrastructure projects for the community at large, authority bonds may fund projects that have varying degrees of appeal and may not earn the projected revenue. Typically, revenue bonds can be issued by any government agency or fund that is managed in the manner of a business, such as entities having both operating revenues and expenses.
Revenue bonds can be compared to general obligation (GO) bonds. Investors buy into authority bonds for a stated period, which allows the financed project to be completed and begin earning revenue; after this period, the bond will pay interest at a specified rate.

Authority Bond

The average annual yield is the sum of all income (interest, dividends, or other) that an investment generates, divided by the age of that investment. 

The average yield on an investment or a portfolio is the sum of all interest, dividends, or other income that the investment generates, divided by the age of the investment or the length of time the investor has held it. Popular versions of average annual yields include annual percentage yield, seven-day yield, tax-equivalent yield, and stock dividend yield. The investor’s average annual yield is 11%, or ((10% + 15% + 8%) / 3).
Average annual yield is often beneficial to assess a portfolio of mixed investments.
There are a variety of yield measurements that apply to many fixed income and money market securities. For example, for a savings account that pays a floating rate of interest on balances, the average annual yield can be calculated by adding all interest payments for the year and dividing that number by the average balance for the year. The tax-equivalent yield fairly compares the yield of a tax-free bond to that of a taxable bond and is also known as after-tax yield.

Average Annual Yield

For a single bond, the average effective maturity is a measure of maturity that takes into account the possibility that a bond might be called back by the issuer.

What's the Difference Between 'Maturity' and 'Duration'?

For a single bond, the average effective maturity (AEM) is a measure of maturity that takes into account the possibility that a bond might be called back by the issuer. Callable bonds allow the issuer to redeem them prior to the stated maturity, thus having lower average effective maturities than stated.
Knowing the likelihood that a bond may be called is crucial to computing average effective maturity. The average effective maturity is computed by weighting each bond's maturity by its market value with respect to the portfolio and the likelihood of any of the bonds being called. The average effective maturity can be described as the length of time it takes for a bond to reach maturity, taking into consideration that an action such as a call or refunding may cause some bonds to be repaid before they mature. For a portfolio of bonds, average effective maturity is the weighted average of the maturities of the underlying bonds.

Average Effective Maturity

Average price is the mean price of an asset or security observed over some period of time.

Average price is the mean price of an asset or security observed over some period of time. To calculate the average cost, divide the total purchase amount by the number of shares purchased to figure the average cost per share.
A simple moving average (SMA) calculates the average of a selected range of prices, usually the closing prices of a security, by the number of periods in that range. The average price is sometimes used in determining a bond's yield to maturity (YTM), where the average price replaces the purchase price in the YTM calculation. The volume-weighted average price (VWAP) is a trading benchmark used by traders that reveals the average price a security has traded at throughout the day, based on both volume and price. In this case, the YTM will also equal the coupon rate after dividing the average return per year by the average price of the bond.

Average Price

B1/B+ is the highest quality credit rating for non-investment grade bonds.

B1/B+ is one of several non-investment grade credit ratings (also known as "junk") that may be assigned to a company, fixed-income security, or floating-rate loan (FRN). Moody's uses the B1 rating, while S&P and Fitch use B+.
B1/B+ are the highest quality speculative rating, followed Ba2/BB and Ba3/BB+.
Companies typically seek the services of a credit rating agency for ratings of new issues in order to assist with transparency and price discovery for investors.
The ratings assigned by the various ratings agencies are based primarily upon the issuer's creditworthiness. Moody’s Investors Service uses B1, while S&P Global Ratings and Fitch Ratings use B+.
B1/B+ is a non-investment grade credit rating used by Moody’s, S&P, and Fitch for an issued debt instrument (generally a bond) or the issuer of the credit (i.e., company or business). Long-term investment-grade ratings run from Aaa (Moody's) and AAA (S&P/Fitch), indicating the most creditworthy bonds/loans or companies, to Baa3 (Moody's) and BBB- (S&P/Fitch). Non-investment grade ratings run from Ba1 (Moody's) and BB+ (S&P/Fitch) to C in the Moody's system, indicating the lowest rating above default.

B1/B+

B3/B- denotes a letter grade ratings agencies assign to high risk/speculative, companies, issuers and their debt obligations. 

B3/B- refers to the letter grades ratings agencies assign to companies, issuers, and securities that are considered speculative and carry a greater degree of risk than investment grade bonds. Non-investment grade ratings indicate riskier industry and business profiles, significantly less financial stability and flexibility, meaning greater uncertainty involving their ability to repay debt.
Within the non-investment grade category, BB-rated companies and entities are considered less risky than those with low single B ratings. Companies considered to be investment grade generally have long track records, large and stable cash flows, high profitability, solid market management teams with a history of good execution on business strategy, and strong market shares.
The demarcation between investment grade and non-investment grade is BBB-. B3/B- is a credit rating used by Moody’s, S&P, and Fitch for an issued debt instrument that are at the bottom end of junk bonds
Moody's uses the B3 rating, while S&P and Fitch use B-. Also, many investment funds have policies/guidelines that restrict their securities holdings to investment-grade debt or place limits on how much non-investment grade debt can be held.

B3/B-

Ba1/BB+ is a rating designation by Moody's Investor Service and S&P Global Ratings that signifies higher degrees of default risk.

S&P Global Ratings. S&P Global Ratings Definitions

Moody's Investor Service. Rating Symbols and Definitions

Ba1/BB+ are rating designations by Moody's Investor Service and S&P Global Ratings, respectively, for a credit issue or an issuer of credit that signify higher degrees of default risk on the agencies' rating spectrums. The issue and the issuer usually have the same rating, but they could be different if, for example, the issue is enhanced with additional credit protection for investors (the bond may have a higher rating), or if the structure of the issue is such that weaker credit protection exists, in which case the bond could be a Ba2/BB instead of Ba1/BB+. Ba1/BB+ are rating designations by Moody's Investor Service and S&P Global Ratings, respectively, for a credit issue or an issuer of credit that signify higher degrees of default risk on the agencies' rating spectrums. A Ba1/BB+ rating is below investment grade, or sometimes referred to as high-yield or junk; therefore, the yield on the bond should be higher than on an investment-grade security to compensate for the greater risk of payment default that the bond investor is taking on. When a company wants to issue a bond to raise money for one of many purposes, usually to finance growth, it typically seeks out the services of the rating agencies to designate their credit opinions on the bond issue and on the issuer itself.

Ba1/BB+

Ba2/BB are ratings by Moody's Investor Service and S&P Global Ratings, respectively, for a credit issue or an issuer of credit below investment grade.

Ba2/BB are rating designations used by the top credit rating agencies for a credit issue or issuer that signify higher degrees of default risk on their rating spectrums. Ba2 falls above the Ba3 rating and below Ba1, while BB is above BB- and below BB+.
Moody's uses the Ba2 rating, while S&P and Fitch use BB.
Companies typically seek the services of a credit rating agency for ratings of new issues in order to assist with transparency and price discovery for investors.
The Ba2/BB rating, as well as all other ratings set by the agencies, have descriptive guidelines. Ba2/BB are rating designations used by the top credit rating agencies for a credit issue or issuer that signify higher degrees of default risk on their rating spectrums. The BB rating for S&P is one notch below BB+ and one notch above BB-.
Fitch notes that its BB rating signifies the issue is susceptible to changes in the business or economy. Ba2/BB are ratings below investment grade but are the second-highest rating in the non-investment grade (junk or high-yield) bracket.

Ba2/BB

Ba3/BB- is the bond rate given to debt instruments that are generally considered to be non-investment grade and speculative in nature, providing a measure of the riskiness of the security and the likelihood of the issuer defaulting on the debt.

Ba3/BB- is the bond rate given to debt instruments that are generally considered speculative in nature. Non-investment grade bonds that are towards the more stable end of the junk-bond rating spectrum, are typically given a credit rating of Ba3/BB- by credit rating agencies Moody's, Standard & Poor's, and Fitch Ratings. Ba3 is a long-term bond rating provided by the Moody's credit rating service, while BB- is the parallel rating provided by both the Standard & Poor's and Fitch rating services. Although this is the highest rating tier within the high yield bond category, a Ba3/BB- rating indicates a higher level of concern that deteriorating economic conditions and/or company-specific developments could hinder the issuer’s ability to meet its obligations. The Ba3/BB- rating is usually decided on after analyzing certain factors at play with the issuing entity, such as the strength of the issuer’s balance sheet, ability to service its debt, current business and economic conditions, and outlook on the issuing company’s growth.

Ba3/BB-

A baby bond is a debt instrument with a face value of under a thousand dollars.

A baby bond is a fixed income security that is issued in small-dollar denominations, with a par value of less than $1,000. However, if the company issues baby bonds instead for a $400 face value, retail investors will be able to affordably access these securities, and the company will have the capacity to issue 10,000 bonds in the capital markets. Baby bonds may also refer to a series of small denomination savings bonds with face value ranging from $75 to $1,000, issued by the U.S. government from 1935 to 1941. Another reason that a company may issue baby bonds is to attract small or retail investors who may not have the funds to purchase the standard $1,000 par value bond. These small-denomination bonds are intended to attract ordinary investors who may not have large amounts to invest in traditional bonds.

Baby Bond

Bank discount basis is a convention used when quoting prices for fixed income securities sold at a discount, such as U.S. Treasury bills.

Bank discount basis, also known as discount yield, is a convention used by financial institutions when quoting prices for fixed-income securities sold at a discount, such as municipal and U.S. Treasury bills. The bank discount basis, or bank discount rate, is calculated using the following formula:
Bank Discount Rate \= DPV PV × 3 6 0 Days to Maturity B a n k D i s c o u n t R a t e \= PV − PP PV × 3 6 0 Days to Maturity where: DPV \= Discount from par value PV \= Par value PP \= Purchase price \\begin{aligned}&\\text{Bank Discount Rate} = \\frac{ \\text{DPV} }{ \\text{PV} } \\times \\frac { 360 }{ \\text{Days to Maturity}} \\\\&\\phantom{Bank Discount Rate} = \\frac{ \\text{PV} - \\text{PP} }{ \\text{PV} } \\times \\frac { 360 }{ \\text{Days to Maturity}} \\\\&\\textbf{where:} \\\\&\\text{DPV} = \\text{Discount from par value} \\\\&\\text{PV} = \\text{Par value} \\\\&\\text{PP} = \\text{Purchase price} \\\\\\end{aligned} ​Bank Discount Rate\=PVDPV​×Days to Maturity360​BankDiscountRate\=PVPV−PP​×Days to Maturity360​where:DPV\=Discount from par valuePV\=Par valuePP\=Purchase price​
Assume an investor purchases a $10,000 Treasury bill at a $300 discount from par value (a price of $9,700), and that the security matures in 120 days. The quote is presented as a percentage of face value and is determined by discounting the bond by using a 360-day-count convention, which assumes there are twelve 30-day months in a year.
The bank discount bias, or discount yield, calculates the expected return of a bond sold at a discount to its par value, or face value. In this case, the discount yield is:
$ 3 0 0  discount $ 1 0 , 0 0 0  par value × 3 6 0 1 2 0  days to maturity \\frac { \\$300 \\text{ discount} }{ \\$10,000 \\text{ par value} } \\times \\frac{ 360 }{ 120 \\text{ days to maturity} } $10,000 par value$300 discount​×120 days to maturity360​
or a 9% yield. Bonds that use bond accretion can be issued a par value, at a discount or at a premium, and accretion is used to move the discount amount into bond income over the remaining life of the bond.

Bank Discount Basis

Barron's Confidence Index measures investor confidence by comparing the respective average yields of high-quality bonds to lower quality bonds.

Barron's Confidence Index measures investor confidence by comparing the respective average yields of high-quality bonds to lower quality bonds. _Barron's Confidence Index = (average yield on 10 top-grade bonds ÷ average yield on 10 intermediate-grade bonds) x 100_
Barron's Confidence Index is rooted in the notion that bond traders are more sophisticated than stock investors and that, as a result, their actions are more predictive of future market activity. Barron's Confidence Index = (average yield on 10 top-grade bonds ÷ average yield on 10 intermediate-grade bonds) x 100.
The Barron's Confidence Index is a ratio that can be useful in deciphering investors' desire to assume additional risk when entering into an investment decision. For example, if the average yield of high-grade bonds is 2.5 percent and the average yield of the intermediate-grade bonds is 3 percent, the Barron's Confidence Index is 83.33 percent (2.5 percent divided by 3 percent and multiplied by 100). The comparison is between the average yield-to-maturity (YTM) of Barron's best-grade bonds to average yield-to-maturity of intermediate-grade bonds.

Barron's Confidence Index

Basis points (BPS) refers to a common unit of measure for interest rates and other percentages in finance.

Table of Contents
Expand The relationship between percentage changes and basis points can be summarized as follows: 1% change = 100 basis points and 0.01% = 1 basis point. Instead of using a 100 basis point change, the price value of a basis point simply uses a 1 basis point change. A bond whose yield increases from 5% to 5.5% is said to increase by 50 basis points, or interest rates that have risen 1% are said to have increased by 100 basis points. What Are Basis Points (BPS)?
Understanding Basis Points (BPS)
Special Considerations
Price Value of a Basis Point
BPS and Investments
Basis points (BPS) refers to a common unit of measure for interest rates and other percentages in finance.

Basis Points (BPS)

A bearer bond is a fixed-income instrument that is owned by whoever has possession of it. Like cash, it has no registered owner.

H.R.4961 - Tax Equity and Fiscal Responsibility Act of 1982

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A bearer bond is a fixed-income security that is owned by the holder, or bearer, rather than by a registered owner. An individual can buy any amount of bearer bonds, submit the coupons for payment, and remain anonymous since the bonds are not registered in the owner's name. As with registered bonds, bearer bonds are negotiable instruments with a stated maturity date and a coupon interest rate. In the U.S., bearer bonds were issued by the U.S. government and by corporations from the late 19th century into the second half of the 20th century. A bearer bond is a fixed-income security that is owned by the holder, or bearer, rather than by a registered owner.

Bearer Bond

Bear flattener refers to the convergence of interest rates along the yield curve as short term rates rise faster than long term rates.

Bear flattener refers to the convergence of interest rates along the yield curve as short term rates rise faster than long term rates and is seen as a harbinger of an economic contraction. Bear flattener refers to the convergence of interest rates along the yield curve as short term rates rise faster than long term rates and is seen as a harbinger of an economic contraction. Bear flattener refers to the convergence of interest rates along the yield curve as short term rates rise faster than long term rates and is seen as a harbinger of an economic contraction. In a normal interest rate environment, the curve slopes upward, from left to right, indicating a normal yield curve, in which bonds with short-term maturities produce lower yields than bonds with long-term maturities. Rising rates depress short-term bond prices, which rapidly increases their yields in the short term, relative to long-term securities.

Bear Flattener

A bear steepener is the widening of the yield curve caused by long-term rates increasing at a faster rate than short-term rates.

A bear steepener is the widening of the yield curve caused by long-term interest rates increasing at a faster rate than short-term rates. A bear steepener occurs when there's a larger spread or difference between short-term bond rates and long-term bond rates–as long as it's due to long-term rates rising faster than short-term rates. A flattening yield curve tends to occur when short-term interest rates are rising faster than long-term yields, or to put another way, when long-term rates are decreasing faster than short-term interest rates. A bear steepener is the widening of the yield curve caused by long-term interest rates increasing at a faster rate than short-term rates. A bear steepener is the widening of the yield curve caused by long-term rates increasing at a faster rate than short-term rates.

Bear Steepener

Below par is a term describing a bond whose market price is below its face value or principal value, usually $1,000.

Below par is a term describing a bond whose market price is trading below its face value or principal value, usually $1,000. A bond trading at par means the bond is trading at the bond certificate's face value. At maturity, the bondholder receives the par value of the bond, which is a higher value than what the bond was purchased for by the investor. An investor who purchases this bond will be repaid the par value at maturity and may periodically receive interest payments over the life of the bond. The bondholder will receive the par value of the bond when it matures, which is less than what the bond was purchased for by the investor.

Below Par

A benchmark bond is a bond that provides a standard against which the performance of other bonds can be measured.

A benchmark bond is a bond that provides a standard against which the performance of other bonds can be measured. While the characteristics of the bond determine the decision regarding what equity to include as a benchmark is made by a committee following broad rules about the operations of the companies represented by a benchmark index, including a benchmark bond or replacing one benchmark bond with another. The concept of a benchmark bond is similar to benchmark equity, but a benchmark bond works in a slightly different way. Bond investors and fund managers use the benchmark bond as a yardstick for measuring bond performance and to understand what rate of return to demand in excess of the benchmark return. An investor that wants to gauge the return for a 10-year corporate bond, which most likely has more risk than a government bond, will compare the yield to the 10-year Treasury bond.

Benchmark bond definition

The bond equivalent yield is a calculation for restating semi-annual, quarterly, or monthly discount-bond or note yields into an annual yield.

In financial terms, the bond equivalent yield (BEY) is a metric that lets investors calculate the annual percentage yield for fixed-come securities, even if they are discounted short-term plays that only pay out on a monthly, quarterly, or semi-annual basis. The bond equivalent yield formula is calculated by dividing the difference between the face value of the bond and the purchase price of the bond, by the price of the bond. The bond equivalent yield (BEY) formula can help approximate what a discounted bond would pay annually, letting investors compare their returns with those of traditional bonds. In financial terms, the bond equivalent yield (BEY) is a metric that lets investors calculate the annual percentage yield for fixed-come securities, even if they are discounted short-term plays that only pay out on a monthly, quarterly, or semi-annual basis. To compare the return on discounted fixed income securities with the returns on traditional bonds, analysts rely on the bond equivalent yield formula.

Bond Equivalent Yield (BEY)

A bond broker is a broker who executes over-the-counter bond trades on behalf of investors (bond traders).

A bond broker is a broker who executes over-the-counter (OTC) and listed bond trades on behalf of investors or traders. While bond brokers are entitled to a 1%-2% markup for their trading services and discretion, the spread might be too excessive (if greater than 5%), creating a conflict of interest between a bond broker who wants to sell bonds at a high price and a client who wants to buy them at a low price. A bond broker is a broker who executes over-the-counter (OTC) and listed bond trades on behalf of investors or traders. The broker trades bonds on the trading floor of an exchange or in the over-the-counter (OTC) markets and buys and sells bond securities on behalf of investors in exchange for commissions. One major requirement before someone can become a bond broker is to pass the General Securities Representative Exam, commonly called the Series 7 exam, which is offered by the Financial Industry Regulatory Authority (FINRA) and allows brokers to engage in the purchase and sale of securities.

Bond Broker

A bond covenant is a legally binding term of an agreement between a bond issuer and a bondholder, designed to protect the interests of both parties.

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Table of Contents
What Is a Bond Covenant?
Understanding Bond Covenants
Affirmative Bond Covenants
Negative Bond Covenants
Example of Bond Covenant Possible bond covenants might include restrictions on the issuer's ability to take on additional debt, requirements that the issuer provide audited financial statements to bondholders, and limitations on the issuer's ability to make new capital investments. Negative or restrictive covenants forbid the issuer from undertaking certain activities; positive or affirmative covenants require the issuer to meet specific requirements. A common penalty for violating a bond covenant is the downgrading of a bond's rating, which could make it less attractive to investors and increase the issuer's borrowing costs. A bond covenant sets out certain activities that must be undertaken, or what activities are forbidden, by a bond issuer.

Bond Covenant

Bond discount is the amount by which the market price of a bond is lower than its principal amount due at maturity. This amount, called its par value, is often $1,000.

Bond discount is the amount by which the market price of a bond is lower than its principal amount due at maturity. Different bonds trade at a discount for different reasons—for example, bonds on the secondary market with fixed coupons trade at discounts when interest rates rise, while zero-coupon bonds short-term bonds are often issued at a bond discount when supply exceeds demand. A bond issued at a discount has its market price below the face value, creating a capital appreciation upon maturity since the higher face value is paid when the bond matures. A bond issued at a discount has its market price below the face value, creating a capital appreciation upon maturity since the higher face value is paid when the bond matures. If the bond's stated interest rate is greater than those expected by the current bond market, this bond will be an attractive option for investors.

Bond Discount

Bond insurance guarantees that even if the issuer of the bond defaults, payments of interest and the principal are still guaranteed by the insurance company.

Bond insurance is a type of insurance policy that a bond issuer purchases that guarantees the repayment of the principal and all associated interest payments to the bondholders in the event of default. One method that may be taken to enhance credit is bond insurance, which generally results in the rating of the insured security being the higher of the claims-paying rating of the insurer and the rating the bond would have without insurance, also known as the underlying rating. Once bond insurance has been purchased, the issuer's bond rating will no longer be applicable and instead, the bond insurer's credit rating will be applied to the bond instead by notching it higher. Bond insurance is a type of insurance purchased by a bond issuer to guarantee the repayment of the principal and all associated scheduled interest payments to the bondholders in the event of default. Bond insurance is a type of insurance policy that a bond issuer purchases that guarantees the repayment of the principal and all associated interest payments to the bondholders in the event of default.

Bond Insurance

Bond power is a legal form authorizing the transfer of ownership of a registered bond from one person, or entity, to another.

Bond power is a separate legal form that authorizes the transfer of ownership of a registered bond from one party to another, without endorsing the actual bond certificate. The bond power form typically includes:
Previous owner's name
Total number of bonds
The bond issuer name
Bond principal amount
The bond certificate number.
In effect, a bond power document is more convenient than a registered bond certificate because it may be exchanged, mortgaged, or sold separately from the bond document it represents. Bond power is a separate legal form that authorizes the transfer of ownership of a registered bond from one party to another, without endorsing the actual bond certificate. Bond power is a separate legal form that authorizes the transfer of ownership of a registered bond from one party to another, without endorsing the actual bond certificate. Bond power document is more convenient than a registered bond certificate because it may be exchanged, mortgaged, or sold separately from the bond document it represents.

Bond Power

A bond purchase agreement (BPA) is a legally binding document between a bond issuer and an underwriter establishing the terms of a bond sale.

A bond purchase agreement (BPA) is a legally binding document between a bond issuer and an underwriter establishing the terms of a bond sale. The terms of a bond purchase agreement will include sale conditions, among other things, such as sale price, bond interest rate, bond maturity, bond redemption provisions, sinking fund provisions, and conditions under which the agreement may be canceled. After the issuer delivers the bonds to the underwriter, the underwriter will put the bonds on the market at the price and yield established in the bond purchase agreement and investors will purchase the bonds from the underwriter. A bond purchase agreement (BPA) is a legally binding document between a bond issuer and an underwriter establishing the terms of a bond sale. The terms of the bond highlighted in the bond indenture include the bond’s maturity date, face value, interest payment schedule, and purpose of the bond issue.

Bond Purchase Agreement

Bond rating agencies are companies that assess the creditworthiness of both debt securities and their issuers. Discover more about them here.

Bond rating agencies are companies that assess the creditworthiness of both debt securities and their issuers. For example, an investment-grade bond ETF will buy or sell bonds depending on the ratings that they receive from the bond rating agencies. On the other hand, bond rating agencies have also been criticized for causing financial losses by making dubious rating downgrades. In the United States, the three primary bond rating agencies are Standard & Poor's Global Ratings, Moody's, and Fitch Ratings. In the United States, the three primary bond rating agencies are Standard & Poor's Global Ratings, Moody's, and Fitch Ratings.

Introduction to Bond Rating Agencies

A bond resolution is a document that lays out the specifics of a bond's issuance and sale, as well as the rights of the issuer and bondholder.

A bond resolution is a document where the issuer authorizes a bond's issuance and sale, along with defining the rights of the respective parties to the bond contract, namely the issuer and the bondholder. A bond resolution is a document where the issuer authorizes a bond's issuance and sale, along with defining the rights of the respective parties to the bond contract, namely the issuer and the bondholder. In some cases, such as with revenue bonds, a bond indenture is used instead of a bond resolution to define the legal terms of the bond issue and its financing. For example, a bond resolution might authorize a municipality to issue $10 million in refunding bonds to refinance an outstanding water revenue bond and to finance the cost of improvements to facilities of the municipal region. A bond resolution can also be called a bond indenture or a bond ordinance.

Bond Resolution

A bond trustee holds a fiduciary duty to oversee a bond issue and to enforce the terms of a bond indenture.

A bond trustee is a financial institution that is granted trust powers, such as a commercial bank or trust company. A bond trustee is hired by a bond issuer and oversees the implementation of a bond or trust indenture, which is a contract between a bond issuer and a bondholder. When a corporate bond is issued, the issuer often hires a third-party bond trustee, usually a bank or trust company, to represent investors who will buy the bond. In particular, the bond trustee ensures that the issuer maintains a fiduciary duty to its bondholders and that all terms and covenants spelled out in the bond issue are enforced. The trustee’s name and contact information are included in the document, which highlights the terms and conditions that the issuer, lender, and trustee must adhere to during the life of the bond.

Bond Trustee

Bond valuation is a technique for determining the theoretical fair value of a particular bond.

Table of Contents
What Is Bond Valuation? The present value of expected cash flows is added to the present value of the face value of the bond as seen in the following formula:
V coupons \= ∑ C ( 1 \+ r ) t V face value \= F ( 1 \+ r ) T where: C \= future cash flows, that is, coupon payments r \= discount rate, that is, yield to maturity F \= face value of the bond t \= number of periods T \= time to maturity \\begin{aligned} &V\_{\\text{coupons}}=\\sum\\frac{C}{(1+r)^t}\\\\ &V\_{\\text{face value}}=\\frac{F}{(1+r)^T}\\\\ &\\textbf{where:}\\\\ &C=\\text{future cash flows, that is, coupon payments}\\\\ &r=\\text{discount rate, that is, yield to maturity}\\\\ &F=\\text{face value of the bond}\\\\ &t=\\text{number of periods}\\\\ &T=\\text{time to maturity} \\end{aligned} ​Vcoupons​\=∑(1+r)tC​Vface value​\=(1+r)TF​where:C\=future cash flows, that is, coupon paymentsr\=discount rate, that is, yield to maturityF\=face value of the bondt\=number of periodsT\=time to maturity​ Bond valuation includes calculating the present value of a bond's future interest payments, also known as its cash flow, and the bond's value upon maturity, also known as its face value or par value. It involves calculating the present value of a bond's expected future coupon payments, or cash flow, and the bond's value upon maturity, or face value. Because a bond's par value and interest payments are fixed, an investor uses bond valuation to determine what rate of return is required for a bond investment to be worthwhile.

Bond Valuation

A bond violation is a breach of the terms of a surety agreement where one party causes damage to the other.

A bond violation is a breach of the covenants of a bond. Assume two years after the work is completed the city experiences an earthquake, and the warehouse collapses, destroying its contents. Because the contractor's work failed to bring the building into compliance and resulted in damage, the contractor has committed a bond violation of the maintenance bond.
In the United States, most states require contractors to obtain a contractor bond as a guarantee to potential clients that they will meet specific standards of operation relative to their industry. The inclusion of the covenant is in the bond's indenture, which is the binding agreement, contract or document between two or more parties.
In a non-financial sense, a bond violation also means a person has broken the conditions of their bail bond.
A bond violation occurs frequently in connection with the construction or building trades. A construction bond is a type of surety bond used by investors in construction projects to protect against disruptions or financial loss due to a contractor's failure to complete the project or to meet contract specifications. The principal is the contractor who is seeking the bond for their business, the obligor is the organization imposing the bond requirement on the contractor, and the surety is an insurance company that guarantees the contractor's obligations.

Bond Violation

Bond washing is the practice of selling a bond just before it pays a coupon payment and then buying it back once the coupon has been paid.

Bond washing is the practice of selling a bond just before it pays a coupon payment and then buying it back once the coupon has been paid. Some jurisdictions consider the interest to be the income of the transferor or original bondholder and will, thus, tax the investor on that income if the investor is discovered to have carried out a bond washing scheme. An investor that sells his or her bonds prior to coupon payment and repurchases it after payment has been made, does so to convert interest income into a capital gain, a process known as bond washing. In this manner, the original bond investor holds the bond again but avoids paying taxes on the bond coupon income. Because bond washing is a tax avoidance scheme in which buyers and sellers may collude to benefit from tax avoidance, it is frowned upon and has been banned in many countries; the practice still exists, however.

Bond Washing

Bond for bond lending is a Federal Reserve lending structure whereby borrowers receive a loan of bonds by using their own bond portfolio for collateral.

Why does the Federal Reserve lend money to banks?

Bond-for-bond lending is a lending structure used in the U.S. Federal Reserve Bank's security lending facility. The bond-for-bond lending structure is different from the Federal Reserve's traditional cash for bond lending structure, in which the borrower takes the loan as cash instead. Bond-for-bond lending is a lending structure used in the U.S. Federal Reserve Bank's security lending facility. Bond-for-bond lending is a lending structure used in the U.S. Federal Reserve Bank's security lending facility. To minimize the risk that the Federal Reserve will incur losses from bond-for-bond lending, banks must pledge collateral in the form of bonds from their own portfolios.

Bond for Bond Lending

A bondholder is an individual or other entity who owns the bond of a company or government and thus becomes a creditor to the bond's issuer.

A bondholder is an investor or the owner of debt securities that are typically issued by corporations and governments. A zero-coupon bond, for example, doesn't pay coupon interest but trades at a deep discount to the face value, rendering its profit at maturity when the bond returns its full-face value. For example, if a bond pays a 4% interest rate, called a coupon rate, and has a $1,000 face value, the investor will be paid $40 per year or $20 semiannually until maturity. The holders of bonds receive their initial principal back when the bonds mature in addition to periodic interest (coupon) payments for most bonds. However, the risk-free feature has a drawback as T-bonds usually pay a lower interest rate than corporate bonds.

Bondholder

A bond ladder is a portfolio of fixed-income securities with different maturity dates. Read how to use bond ladders to create steady cash flow.

Table of Contents
What Is a Bond Ladder?
Understanding Bond Ladder
Benefits of a Bond Ladder
Example of a Bond Ladder For example, to build a 10-year corporate bond ladder, an investor could purchase the following ETFs in equal amounts:
The Invesco BulletShares 2021 Corporate Bond ETF (BSCL)
The Invesco BulletShares 2022 Corporate Bond ETF (BSCM)
The Invesco BulletShares 2023 Corporate Bond ETF (BSCN)
The Invesco BulletShares 2024 Corporate Bond ETF (BSCO)
The Invesco BulletShares 2025 Corporate Bond ETF (BSCP)
The Invesco BulletShares 2026 Corporate Bond ETF (BSJQ)
The Invesco BulletShares 2027 Corporate Bond ETF (BSJR)
The Invesco BulletShares 2028 Corporate Bond ETF (BSJS)
The Invesco BulletShares 2029 Corporate Bond ETF (BSCT)
The Invesco BulletShares 2030 Corporate Bond ETF (BSCU)
Instead of building a bond ladder, an investor can purchase an ETF that holds a diversified portfolio of bonds of varying durations. In order to construct a 10-year Treasury bond ladder, an investor would simply buy the following 10 ETFs in equal amounts:
The iShares iBonds Dec 2021 Term Treasury ETF (IBTA)
The iShares iBonds Dec 2022 Term Treasury ETF (IBTB)
The iShares iBonds Dec 2023 Term Treasury ETF (IBTD)
The iShares iBonds Dec 2024 Term Treasury ETF (IBTE)
The iShares iBonds Dec 2025 Term Treasury ETF (IBTF)
The iShares iBonds Dec 2026 Term Treasury ETF (IBTG)
The iShares iBonds Dec 2027 Term Treasury ETF (IBTH)
The iShares iBonds Dec 2028 Term Treasury ETF (IBTI)
The iShares iBonds Dec 2029 Term Treasury ETF (IBTJ)
The iShares iBonds Dec 2030 Term Treasury ETF (IBTK)
No. Popular all-duration ETFs include the iShares Core U.S. Aggregate Bond ETF (ASG), the Vanguard Total Bond Market ETF (BND), the Vanguard Total International Bond ETF (BNDX), and the iShares TIPS Bond ETF. The purpose of purchasing several smaller bonds with varying dates of maturity rather than one large bond with a single maturity date is to minimize interest-rate risk, increase liquidity, and diversify credit risk.

Bond Ladder

Bond laddering is an investing strategy that involves buying bonds that mature at various dates so that the investor can take advantage of upswings in interest rates.

Bond laddering is an investment strategy that involves buying bonds with different maturity dates so that the investor can respond relatively quickly to changes in interest rates. A bond investor might purchase both short-term and long-term bonds in order to disperse the risk along the interest rate curve. Bond laddering is an investment strategy that involves buying bonds with different maturity dates so that the investor can respond relatively quickly to changes in interest rates. By taking the total dollar amount you plan to invest and dividing it equally by the total number of years for which you wish to have a ladder, you will arrive at the number of bonds for this portfolio or the number of rungs on your ladder. Bond laddering offers steady income in the form of those regularly occurring interest payments on short-term bonds.

Bond Laddering

The bond market is the collective name given to all trades and issues of debt securities. Learn more about corporate, government, and municipal bonds.

Table of Contents
What Is the Bond Market? Like anything in life, and especially in finance, bonds have both pros and cons:
Tend to be less risky and less volatile than stocks.
Wide universe of issuers and bond types to choose from.
The corporate and government bond markets are among the most liquid and active in the world.
Bondholders have preference over shareholders in the event of bankruptcy.
Lower risk translates to lower return, on average.
Buying bonds directly may be less accessible for ordinary investors.
Exposure to both credit (default) risk as well as interest rate risk. These are bonds issued by governments and companies located in emerging market economies, these bonds provide much greater growth opportunities, but also greater risk, than domestic or developed bond markets. National-issued government bonds (or sovereign bonds) entice buyers by paying out the face value listed on the bond certificate, on the agreed maturity date, while also issuing periodic interest payments along the way. The bond market—often called the debt market, fixed-income market, or credit market—is the collective name given to all trades and issues of debt securities.

Fixed Income Essentials

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