Fixed income

Corporate Bond Default Recovery Rates How much of the face value bondholders recover after a corporate default, and how seniority and timing shape recovery outcomes.

Corporate Bond Defeasance How corporations retire bonds without redeeming them early by placing government securities in escrow to cover future payments.

Corporate Bond Ladder Strategy A corporate bond ladder spreads maturities across years to manage reinvestment risk and smooth interest-rate exposure. Learn how to build and maintain one.

Corporate Bond Maturity Wall Explained A corporate bond maturity wall occurs when a large volume of debt matures in a concentrated period, creating acute refinancing risk and liquidity strain.

Corporate Bond Price vs. Yield: The Inverse Relationship Calculated How bond prices fall when yields rise through discounted cash flow arithmetic, with worked examples showing the mathematical inverse relationship.

Corporate Bond Types Classification of corporate bonds by seniority and features—senior secured, unsecured, subordinated, and convertible.

Corporate Bonds for Retirees: Income, Risk, and Portfolio Role Corporate bonds for retirees offer higher income than treasuries but carry credit and interest-rate risk. Learn the trade-offs between yield, safety, and portfolio allocation.

Coupon Payment The periodic interest payment a bondholder receives from the issuer, typically expressed as a percentage of the bond's par value and paid semi-annually.

Coupon Rate The coupon rate is the annual interest rate that a bond issuer promises to pay to bondholders, expressed as a percentage of the bond's face value.

Covenant-Lite Bond High-yield bonds issued with minimal maintenance tests, shifting credit protection from lenders to borrowers.

Covenant-Lite High-Yield Bonds: What Investors Give Up Covenant-lite high-yield bonds strip away creditor protections. Understand which safeguards disappear and how that changes recovery in default.

Coverage Test Failure Consequences in Structured Credit Coverage test failure in CLOs and CDOs triggers cash diversion: subordinate tranches stop receiving principal paydown. Learn what happens next and how breaches are cured.

Credit Card ABS: How the Structure Works Credit card ABS pools revolving receivables into a master trust, issuing tranches backed by continuously updated collateral; learn how principal and interest are protected.

Credit Enhancement Techniques used to improve the credit quality of a securitization, allowing senior tranches to earn investment-grade ratings despite the underlying assets' risk profile.

Credit Loss Model A quantitative framework that estimates the probability and severity of loan defaults in a structured credit pool, used to price tranches and assess credit risk.

Credit Rating A credit rating is an assessment of a borrower's ability and willingness to repay debt. Ratings agencies assign letter grades from AAA (highest quality) to D (default).

Credit Rating and Government Bonds The assessment of a government's creditworthiness by rating agencies, affecting the government's borrowing costs.

Credit Rating Outlook vs Credit Watch: What the Difference Means Understand credit rating outlook vs credit watch: stable/positive/negative outlooks signal medium-term trends, while credit watch signals imminent reassessment.

Credit Rating Scale Comparison: Moody's, S&P, and Fitch Side-by-side mapping of Moody's, S&P, and Fitch credit rating scales—how the three major agencies use different symbols for equivalent credit quality.

Credit Rating Upgrade: Effect on Bond Price How bond prices respond to credit rating upgrades, and why the price impact is typically smaller than for downgrades.

Credit Rating vs Credit Score: Key Differences Clarify the confusion: credit ratings are agency grades on bonds; credit scores are consumer financial profiles from bureaus. They measure different things.

Credit Rating Withdrawal: What It Means for Bondholders Why ratings agencies withdraw credit ratings, what triggers a withdrawal, and what the absence of a rating signals about bond risk.

Credit Ratings and Self-Employed Borrowers: What Changes Learn how credit rating for self-employed borrowers factors in variable income, business debt, and irregular cash flow differently than traditional wage earners.

Credit Ratings: General Obligation vs Revenue Municipal Bonds Credit ratings differ sharply between GO and revenue bonds. General obligation bonds carry full-faith backing; revenue bonds depend on project cash flow.

Credit Spread A credit spread is the difference in yield between a corporate bond and a Treasury security of the same maturity. It compensates investors for credit risk.

Credit Spread The difference in yield between a corporate bond and a comparable U.S. Treasury bond, reflecting the additional risk investors demand for corporate credit.

Credit Support The structural mechanisms—tranching, overcollateralization, reserves, triggers—that protect investors from credit losses in securitized credit structures.

Credit Watch A temporary monitoring status placed on a debt issuer by rating agencies when a rating change is under active consideration.

Credit-Linked Note A bond that embeds a credit default swap, passing default risk from a reference entity to note holders in exchange for higher yield.

Cross-Default Clause in Corporate Bond Indentures How a cross-default provision triggers default on all debt when a single payment is missed.

Crossover Bond A crossover bond is rated at the boundary between investment-grade and high-yield. Learn how split ratings affect pricing, index inclusion, and demand.

Current Refunding Retiring outstanding municipal debt by issuing new bonds and retiring the old ones within 90 days, commonly used to capitalize on falling interest rates.

Current Yield Current yield is the annual coupon payment divided by the bond's current market price, expressed as a percentage.

Curve Flattening A period when the gap between short-term and long-term interest rates narrows, typically signaling changing monetary policy or economic expectations.

Curve Steepening When the spread between short-term and long-term bond yields widens, reflecting shifting expectations about economic growth, inflation, or monetary policy.

Day-Count Conventions How Actual/360, Actual/365, and 30/360 rules alter accrued interest and yield calculations for bonds.

De Minimis Rule (Municipal Bonds) An IRS threshold determining whether gains on discount municipal bonds are taxed as capital gains or ordinary income; bonds acquired below this threshold are treated as having original-issue discount.

Debenture Unsecured long-term corporate debt backed only by the issuer's creditworthiness, not collateral.

Debt Ceiling A statutory limit on the total amount of federal government debt outstanding, whose breach forces negotiation and creates periodic refinancing crises.

Debt Management Office The government agency responsible for issuing, managing, and refinancing the national debt portfolio while minimizing borrowing costs.

Default Rate Default rate is the percentage of debt issuers that fail to make scheduled payments within a specified period, typically measured annually by credit rating.

Delinquency A borrower's failure to make a required loan or mortgage payment on time, typically measured as the percentage of a pool's borrowers who are 30+ days overdue.

Discount Yield The annualized return on Treasury bills quoted as a percentage of face value, not the purchase price.

Distressed Debt Exchange An out-of-court debt restructuring in which creditors voluntarily (or under pressure) exchange existing bonds for new securities with reduced face value or extended maturity.

Dollar Duration The absolute dollar price change in a bond for a one-basis-point move in yield.

Double-Barreled Bond A municipal bond secured by both a dedicated revenue stream and a general obligation pledge, combining revenue and GO financing.

Duration Duration is a measure of a bond's sensitivity to interest-rate changes. It measures the weighted average time until cash flows are received.

Duration and Interest Rate Risk in Municipal Bonds How duration measures interest rate sensitivity in municipal bonds. Learn why longer-maturity tax-exempt bonds amplify price volatility and how to manage this risk.

Duration for Corporate Bonds Explained Duration measures a bond's price sensitivity to interest rate changes. A 5-year duration bond loses approximately 5% in value for every 1% rise in yield. Calculated as weighted-average time to cash flows.

Duration Gap: Measuring Interest-Rate Exposure for Balance Sheets Duration gap is the difference between the weighted average duration of assets and liabilities, revealing a balance sheet's net sensitivity to interest-rate changes.

Duration of a Zero-Coupon Bond vs a Coupon Bond Why a zero-coupon bond's duration always equals its maturity, while coupon-paying bonds have shorter duration.

Duration Risk When the Yield Curve Is Flat Why a flat yield curve reduces reward-per-unit-duration-risk, making extended maturities less attractive and requiring careful position sizing.

DV01 The dollar value of a one-basis-point move in bond yields, measuring a bond's monetary interest-rate sensitivity.

Education Bonds Municipal bonds issued to fund construction and renovation of primary, secondary, and higher-education institutions.

Effective Duration A measure of bond price sensitivity to yield changes that accounts for bonds with embedded options, like callable or putable bonds.

Effective Federal Funds Rate vs the FOMC Target Range Why the effective federal funds rate can differ from the FOMC's target range and how the Fed uses tools to keep overnight rates in bounds.

Equipment ABS Mechanics Equipment ABS securitizes loans and leases on machinery, vehicles, and industrial equipment. Key credit drivers differ sharply from residential mortgages: residual value risk, lease-payment timing, and equipment obsolescence.

Esoteric ABS Asset Classes Esoteric ABS asset classes extend securitisation beyond mortgages and auto loans to royalties, data-center revenue, litigation finance, and other non-traditional collateral.

Essential Service Revenue Bonds Bonds backed by steady revenue from utilities, water systems, or other essential public services with dedicated revenue streams.

Eurobond A eurobond is an international debt security issued in a currency different from the currency of the country where it is issued. It is underwritten and traded internationally without domestic regulatory restrictions.