Glossary 
30/01/2004 
 

Glossary For Bonds

Callable Bond

A bond which is redeemable by the issuer prior to the maturity date at a specified price.

Convertible Bond

A bond that can be converted into a fixed number of ordinary shares at a pre-determined price at any date before the bond matures.

Discount Bond

A bond that is sold below the par value.

Floating-rate Bond

A bond for which the interest rate is adjusted periodically, linking to the level of a market reference yield.

Mortgage Bond

A kind of bond that pledges either real property (using a mortgage) or personal property as security.

Zero-coupon Bond

A bond that bears no interest return but it is sold at a discount from the par value.

Par Value

The value of a bond, as stated on the coupon. Interest is calculated on par value.

Coupon Rate

The annual rate of interest, calculated on the bond's par value, which the issuer promises to pay to bondholders.

Coupon Frequency

The number of interest payment that the bond issuer promises to pay to bondholders. Coupon payments are usually made each six months or each year.

Accrued Interest

Interest due from issue date or from the last coupon payment date to the settlement date.

Basis Point

One 1/100 of 1 per cent i.e. 0.01%. Yield differences among fixed-income securities are stated in basis points.

Maturity Date

The date when the principal amount of the bond is payable.

Premium

The amount by which the price of a bond exceeds its par value.

Yield to Maturity

It represents the total of coupon payments until maturity, plus interest on interest, and whatever gain or loss is realized from the security at maturity.

Credit Ratings

An indicative rating set by rating agencies to assess the overall ability of the issuer to fully repay the debt obligation. Minimum investment grade is generally set at Baa or BBB or above.

Default

Failure on the part of the issuer to pay interest and/or principal when due.