Fixed income

Payment-in-Kind Bond Debt that allows the issuer to pay interest with additional bonds instead of cash, preserving liquidity in leveraged or distressed situations.

Perpetual Bond A perpetual bond is a debt security with no maturity date that pays a fixed coupon forever. The issuer never redeems the principal and is obligated to pay coupons indefinitely.

Perpetual Bond Features Never-maturing debt instrument with indefinite coupon payments and no principal redemption date.

Planned Amortization Class Bond A CMO tranche with a fixed principal repayment schedule, supported by companion tranches that absorb prepayment and extension variability.

Point-in-Time Rating A credit rating methodology that reflects current creditworthiness as of the rating date, used primarily by banks for capital adequacy.

Positive Convexity Property of bonds where the price-yield relationship accelerates gains when yields fall, exaggerating the price sensitivity benefit.

Premium vs Discount Bond: What the Difference Means for Investors Why bonds trade above or below par: how premium and discount bonds affect returns, amortization, and tax treatment for fixed-income investors.

Prepayment Lockout Period in ABS Understand prepayment lockout periods in ABS: how they protect investor cash flows and differ by mortgage type and market conditions.

Prepayment Speed The rate at which mortgage borrowers repay principal ahead of schedule, measured by PSA or CPR conventions and critical to mortgage-backed security valuation.

Prepayment Versus Call Feature The difference between the government's right to pay off a bond early and the embedded option risks for investors.

Price Value of a Basis Point vs DV01 Clarify the conceptual and sign differences between PVBP and DV01, and when the distinction matters in fixed-income hedging and risk.

Price-Yield Relationship The inverse, convex curve connecting a bond's market price to its yield to maturity—the foundation of bond trading.

Primary Dealer Designated financial institutions obligated to bid at Treasury auctions and provide two-way markets, anchoring the world's largest bond market.

Prime Money-Market Fund vs Government Money-Market Fund Prime money market fund vs government money market fund: eligible holdings, NAV rules, liquidity fees, and yield differences explained.

Principal Deficiency Ledger An accounting record in securitized structures that tracks cumulative principal losses, guiding waterfall allocations and subordinate-tranche step-downs.

Principal-Only Strip A securitized mortgage strip that receives only principal repayments and gains value when rates fall and prepayments accelerate.

Private Activity Bond Tax-exempt municipal bonds whose proceeds primarily benefit a private business or individual rather than the public.

Private Placement Bond A corporate bond sold to a limited number of sophisticated investors through negotiated terms, rather than publicly issued through an underwriter.

Pull to Par: How a Bond Price Converges at Maturity Pull to par bond pricing explains how a premium or discount bond's price mechanically drifts toward face value as maturity approaches, with worked examples.

Put Options and Tender Features in Municipal Bonds Municipal bond put options and tender features let investors return bonds at par value on set dates, reducing interest-rate risk but adding liquidity-provider credit risk.

Putable Bond A putable bond is a debt security that grants the bondholder the right to sell the bond back to the issuer at par (or a stated price) on specified dates.

Ramp Period The initial phase of a securitization or investment pool during which collateral is accumulated before amortization begins, affecting investors' cash flow expectations and risk profiles.

Rating Agency Conflict of Interest: The Issuer-Pays Problem Explores the tension between revenue incentives and rating accuracy when issuers pay agencies, along with evidence of grade inflation and post-2008 regulatory reforms.

Rating Agency Methodology The published scoring frameworks and financial metrics that rating agencies use to assign credit letter grades.

Rating Cliff Effect in Bond Portfolios The cascade of forced selling and spread widening when a large issuer is downgraded below a regulatory or index threshold, triggering mandatory divestment.

Rating Drift Systematic upward bias in credit rating stability, where agencies favor upgrades over downgrades over extended periods.

Rating Migration Movement of debt issuers across credit rating categories, tracked via cohort analysis for credit risk assessment.

Rating Shopping The practice of issuers selecting which rating agencies to approach, often to obtain favourable outcomes.

Rating Trigger Covenant Downgrade acceleration clause in loan documents that increases borrowing costs or triggers prepayment if credit rating falls.

Reading the Yield Curve as a Small Bond Investor How individual bond investors interpret yield curve slopes to decide bond maturities and durations without institutional tools.

Real Yield The return on a bond adjusted for inflation, measuring the true purchasing power gained by the investor.

Real Yield Curve vs Nominal Yield Curve Understand the difference between the TIPS-derived real yield curve and the nominal Treasury curve, and what the gap reveals about inflation expectations.

Real Yield vs Nominal Yield on Bonds Learn the difference between nominal yield (stated coupon rate) and real yield (inflation-adjusted return)—and when each metric matters for bond investing.

Refinancing Risk The risk that an issuer cannot refinance or must refinance debt at unfavorably high interest rates.

Registered Bond A bond where ownership is formally recorded with the issuer or transfer agent, enabling direct interest payments and tax transparency.

Reinvestment Period Window during which a CLO or CDO manager may reinvest principal proceeds into new collateral rather than using them to repay notes.

Reinvestment Risk in Bonds Explained Reinvestment risk in bonds arises because coupon payments must be reinvested at uncertain future rates, causing realized returns to diverge from yield to maturity.

Reopening of a Bond Issue When a government reissues debt under the same CUSIP to add supply to an existing bond, improving liquidity and deepening the benchmark curve.

Repo Collateral: Treasuries, Agency Bonds, and MBS Hierarchy of collateral used in repo markets—on-the-run Treasuries, agency bonds, and mortgage-backed securities—and how collateral quality affects repo rate and haircut.

Repo Haircut How collateral is marked below market value in repo to protect lenders against price and liquidity risk.

Repo vs Reverse Repo: Same Trade, Two Perspectives Why repo and reverse repo describe the same transaction from opposite sides; explained with a single example.

Repurchase Agreement (Repo) A repurchase agreement is a short-term, collateralized borrowing transaction in which a seller agrees to repurchase securities at a higher price on a specified future date.

Reserve Account Cash held within a securitization to cover periodic shortfalls and protect bondholders before assets are liquidated or subordinated tranches are impaired.

Residual Tranche in Structured Credit Residual tranche in structured credit captures cash flows after senior tranches are paid. Learn how excess spread and prepayment risk drive returns.

Residual Value Risk in Auto and Equipment ABS Residual value risk is the danger that leased assets will be worth less than forecast at lease end, eroding ABS subordination and causing losses.

Revenue Bond A revenue bond is a municipal bond backed exclusively by the revenue from a specific project or utility. The issuing government's taxing power is not pledged as security.

Reverse Repurchase Agreement A reverse repurchase agreement is the opposite side of a repo transaction, in which a party purchases securities with an agreement to sell them back at a higher price.

Riding the Yield Curve A bond strategy of buying longer-maturity securities and selling them before maturity to profit from declining yields as they move down the curve.

Rising Star Bond A high-yield bond that has been upgraded to investment-grade status, triggering forced buying from mandate-bound institutional investors.

Roll-Down Return The return generated when a bond moves to a lower yield as it matures, independent of yield curve changes.

Roll-Down Return on Government Bonds How bonds earn extra return as they move down an upward-sloping yield curve toward a lower yield.

Rolling Over Treasury Bills at Maturity Learn what happens when a Treasury bill matures and how to set up automatic reinvestment. Covers both TreasuryDirect and brokerage options for rolling T-bills.

Rule 144A Bond A private placement sold to qualified institutional buyers under an SEC exemption, enabling rapid market access for corporate debt.

S&P Rating Action An announcement by Standard & Poor's of a change in credit rating, outlook, or status for a bond issuer.

Savings Bond Savings bonds are non-negotiable Treasury-issued securities designed for individual savers. They accrue value at a guaranteed rate, cannot be traded, and are held in registered form to ensure ownership.

Secondary Market Trading The buying and selling of previously-issued bonds after their original issuance in the auction or primary market.

Secured Corporate Bond Corporate debt with a perfected lien on specific assets that gives bondholders priority claim in default.

Securitization The process of pooling cash-generating assets and converting them into securities sold to investors, enabling originators to free up capital and transfer risk.

Senior Bond A bond that has priority claim on a company's assets and cash flow before subordinated debt in bankruptcy or default.

Sequential-Pay CMO A collateralized mortgage obligation in which all principal repayments flow to the first tranche until it is fully retired, then sequentially cascade to lower-priority tranches.