Glossary · 12 terms
Fixed Income
All fixed income terms in the EquitiesAmerica.com glossary — plain-English definitions for American investors.
Bond(fixed income security)
A bond is a fixed income security that represents a loan made by an investor to a borrower — typically a corporation or government — in exchange for periodic interest payments and the return of the principal at maturity.
Bond Rating(credit rating)
A bond rating is an independent assessment of a bond issuer's creditworthiness and ability to meet its debt obligations, assigned by credit rating agencies such as Moody's, S&P Global, and Fitch on standardized letter-grade scales.
Convertible Bond(convertible note)
A convertible bond is a corporate bond that gives the holder the right to convert the bond into a specified number of the issuer's common shares at a predetermined price, combining fixed income characteristics with equity upside potential.
Corporate Bond(corporate debt)
A corporate bond is a debt security issued by a corporation to raise capital, offering investors regular coupon payments and the return of principal at maturity in exchange for lending money to the company.
Coupon Rate(stated rate)
The coupon rate is the annual interest rate paid by a bond issuer on the face value of the bond, expressed as a percentage and typically distributed to bondholders in semi-annual payments.
Duration(Macaulay duration)
Duration is a measure of a bond's price sensitivity to changes in interest rates, expressed in years; the higher the duration, the more a bond's price will change for a given shift in yields.
High-Yield Bond(junk bond)
A high-yield bond — also called a junk bond — is a corporate bond rated below investment grade (below Baa3/BBB- by Moody's and S&P respectively), offering higher interest rates to compensate investors for the elevated risk of default.
Investment Grade(investment-grade bond)
Investment grade refers to bonds or issuers rated Baa3/BBB- or higher by Moody's and S&P respectively, indicating a relatively low risk of default and making the securities eligible for purchase by many institutional investors governed by strict credit quality mandates.
Municipal Bond(muni)
A municipal bond — commonly called a 'muni' — is a debt security issued by a state, city, county, or other government entity to finance public projects, and whose interest income is typically exempt from federal income tax.
Par Value(face value)
Par value — also called face value or principal — is the nominal value of a bond as stated on the certificate, representing the amount the issuer promises to repay the bondholder at maturity.
Yield to Maturity(YTM)
Yield to maturity (YTM) is the total annualized return an investor can expect to earn if a bond is purchased at its current price and held until it matures, assuming all coupon payments are reinvested at the same rate.
Zero-Coupon Bond(zero coupon bond)
A zero-coupon bond is a debt security that pays no periodic interest but is issued at a deep discount to its face value and redeems at par at maturity, with the investor's return being the difference between the purchase price and the face value.