CCM Debt Securities key terms

Interest that has built up on a bond since the last coupon payment date but has not yet been paid to the holder. The buyer typically compensates the seller for it at settlement.

A bond whose principal is repaid gradually over its life rather than in one lump sum at maturity. Regular payments combine interest and principal, reducing outstanding balance over time.

A unit equal to one hundredth of a percentage point (0.01%). Used to express changes in yields, spreads, and interest rates precisely without ambiguity.

A debt security owned by whoever physically holds the certificate, with no ownership register. Coupons are clipped and presented for payment. Largely replaced by registered and book-entry forms.

A bond recorded electronically on the books of a depository rather than issued as a physical certificate. Ownership transfers through ledger entries, simplifying settlement and reducing loss risk.

A bond feature letting the issuer redeem the security before maturity at a set price, usually after a lockout period. Issuers exercise it when refinancing is cheaper, creating reinvestment risk for holders.

The quoted bond price excluding accrued interest. The amount actually paid by the buyer equals the clean price plus accrued interest, which is the dirty price.

Assets pledged to secure a debt obligation, giving the lender a claim on them if the borrower defaults. Common examples include property, equipment, receivables, and marketable securities.

The number of common shares a convertible bond holder receives upon conversion. It equals the bond's par value divided by the conversion price.

A bond that the holder may exchange for a fixed number of the issuer's common shares. It pays a lower coupon than straight debt because the conversion option has value.

The annual interest rate stated on a bond, expressed as a percentage of par value. It determines the periodic cash interest paid to holders until maturity.

A promise in a bond indenture that the issuer must keep or avoid. Affirmative covenants require actions; negative covenants restrict them, such as limits on additional debt.

An independent agency's opinion of an issuer's ability and willingness to repay debt on time. Ratings range from high investment grade to speculative and default categories.

The difference in yield between a corporate bond and a comparable government bond. It compensates investors for default, liquidity, and other risks specific to the issuer.

A bond's annual coupon payment divided by its current market price. It ignores capital gains or losses and the time value of money.

An unsecured bond backed only by the issuer's general creditworthiness, not by specific pledged assets. Holders rank as general creditors in a default.

The full price a bond buyer pays, equal to the clean price plus accrued interest. Also called the invoice or full price.

A measure of a bond's price sensitivity to interest rate changes, expressed in years. Higher duration means larger price moves for a given change in yield.

The principal amount a bond issuer promises to repay at maturity, also called par value. Coupon payments are usually calculated as a percentage of this amount.

A bond whose coupon resets periodically based on a reference rate such as SOFR plus a fixed spread. It reduces interest rate risk compared with fixed-rate debt.

A bond rated below investment grade, also called a junk bond. It offers higher yields to compensate investors for greater default risk and price volatility.

The legal contract between a bond issuer and its holders, setting out the terms of the debt. It specifies coupon, maturity, covenants, and default remedies.

The risk that a bond's price falls when market interest rates rise. Longer maturities and lower coupons generally mean greater exposure.

A credit rating category indicating relatively low default risk, typically BBB- or Baa3 and above. Many institutional investors are restricted to holding only these bonds.

The entity that borrows money by selling debt securities and is obligated to pay interest and repay principal. Issuers include governments, municipalities, and corporations.

The risk that a bond cannot be sold quickly at a fair price because trading volume is thin. It is greater for small or less-followed issues and widens bid-ask spreads.

A call feature requiring the issuer to pay holders a price based on the present value of remaining payments, often using a government yield plus a spread. It discourages early redemption.

The date on which a bond's principal becomes due and payable to the holder. It marks the end of the security's life and its final coupon payment.

Duration adjusted to estimate the percentage price change for a one percentage point change in yield. It is calculated as Macaulay duration divided by one plus yield per period.

The stated principal amount of a bond, repaid at maturity and used to compute coupon payments. A bond trading at par has a price equal to this amount.

A bond feature allowing the holder to sell the bond back to the issuer at a specified price on set dates. It protects investors if rates rise or credit quality deteriorates.

The benchmark interest rate to which a floating rate note's coupon is tied, such as SOFR or a government bill rate. The coupon equals this rate plus a quoted spread.

A bond whose owner's name is recorded with the issuer or its agent, so payments go only to the registered holder. Ownership transfers require updating the register.

The risk that coupon payments or maturing principal must be reinvested at lower rates than the original bond earned. It rises when rates fall and for bonds with early redemption features.

A bond backed by specific pledged assets that holders can claim in default. This lowers risk and generally allows a lower coupon than unsecured debt from the same issuer.

A provision requiring the issuer to set aside money or retire a portion of the bond issue periodically before maturity. It reduces default risk but can create partial early redemptions.

A bond that ranks below other, senior creditors for repayment if the issuer defaults. It carries higher risk and therefore pays a higher yield than senior debt.

The remaining time until a bond's principal is due. It affects a bond's price sensitivity to interest rates and its classification as short, intermediate, or long term.

A financial institution appointed under a bond indenture to represent holders' interests. It monitors covenant compliance, manages funds, and acts on behalf of bondholders in default.

The difference between two yields, often a bond's yield and a benchmark's. It is quoted in basis points and reflects relative risk, credit quality, or market segment.

The total return earned if a callable bond is redeemed by the issuer on its call date at the call price. It is calculated like yield to maturity but uses the call date and price.

The annualized return an investor earns by holding a bond to maturity, assuming all coupons are reinvested at that same rate. It equates the present value of future cash flows to the price.

A bond that pays no periodic interest and is sold at a deep discount to par. The investor's return comes entirely from the difference between purchase price and maturity value.