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Accrued interest
Interest accumulated but not yet paid. Bond settlement between coupon dates may add it to the quoted price. Check quotation/payment conventions before comparing displayed price with required cash.
Bond fund
A fund holding bonds/debt under its mandate. Unit value reflects portfolio results and expenses. Most ongoing funds promise no purchase-cost repayment date; credit, rate and liquidity risks remain.
Bond ladder
Bonds with staggered maturities, arranging principal payments subject to issuer payment/early-redemption terms. Proceeds may fund spending or reinvestment. A ladder alone guarantees neither diversification nor maintenance-free ownership.
Callable bond
A bond permitting issuer redemption before maturity under specified terms. Earlier repayment changes cash flows and may force less favourable reinvestment. Check permitted dates/amounts when reading yield.
Credit rating
An agency’s relative creditworthiness assessment of an issuer or specific debt. Check subject, agency and date. Ratings can change, guarantee no repayment and settle neither price attractiveness nor liquidity/duration suitability.
Credit risk
Loss risk from borrower failure or deteriorating creditworthiness. Price can fall before missed payments; default recovery depends on claim, assets and legal process. A high promised coupon establishes no payment reliability.
Current yield
Annual coupon income divided by current bond price. It omits price-to-redemption gain/loss and the complete payment schedule, differing from yield to maturity and total return.
Duration (modified)
Estimated percentage price sensitivity to a small change in a bond’s own yield, with unchanged cash flows. Duration 5 implies roughly −2.5% for a +0.5-percentage-point yield move. It excludes income, bounds no loss and sets no recovery deadline.
High-yield bond
Debt below investment grade on the relevant rating scale, with greater assessed credit risk and possible sale difficulty. The name promises no higher realised return; large yields can reflect payment doubts.
Inflation-linked bond
Debt adjusting specified payments to a contractual inflation index. US TIPS apply fixed coupons to adjusted principal. Index/timing/redemption protections vary; linkage guarantees neither stable sale price nor matching personal expenses/spending currency.
Interest-rate risk
Effects of changing rates/yields on value and future income. Existing fixed payments generally fall in price when required yields rise; reinvestment may then earn more. Net effects depend on holdings, payments and spending dates.
Investment-grade bond
Debt in a rating scale’s higher-credit-quality categories. Check agency definitions and the rated obligation. Default, yield changes, inflation, liquidity and currency risks remain; the category establishes no attractive purchase price.
Credit quality and other risks
Real yield
An inflation-linked bond’s quoted yield relative to its index, reflecting purchase price. It can be negative despite a positive coupon. Realised purchasing power also depends on implementation, taxes, holding period and personal expense differences.
Reinvestment risk
Risk that coupons/principal/early-redemption proceeds cannot be reinvested on assumed terms. Lower rates reduce later income. Yield calculations supply no future reinvestment rate; spending payments also changes invested resources.
Secured debt
Debt backed by specified collateral. Recovery rights depend on contract/law; assets may be insufficient, disputed or hard to realise. Security guarantees neither full repayment nor prompt recovery.
Subordinated debt
Debt ranking behind specified senior claims, affecting default recovery. Read issuer, guarantees, collateral and law together. Different claim priorities can still depend on the same borrower.
Target-maturity bond fund
A fund holding debt maturing near a stated year, with planned closure/distribution; also called defined-maturity. That date guarantees no purchase-cost repayment. Losses, expenses and the cash transition affect proceeds.
Planned date, uncertain amount
Yield to call
Yield calculated from a specified early-redemption date/price instead of final maturity/principal. It assumes that payment schedule without establishing whether the issuer will call or the investor will realise the rate.
Yield to maturity
The usually annualised discount rate equating price with scheduled coupons/principal at their payment dates. It uses promised payments without guaranteeing them. Reinvestment, expenses, taxes or early sale change realised results.
The scheduled-payment calculation
Yield to worst
Lowest calculated yield across included maturity/contractual-redemption scenarios. Check dates/terms covered. It is no universal loss floor: default or an adverse sale can produce worse outcomes.
Related materials
- Portfolio constructions and derivatives: investing glossary
- Evidence and investor behaviour: investing glossary
- Investment instruments and funds: investing glossary
- What yield to maturity tells you
- How duration changes a bond's price risk
- What credit quality can and cannot tell you
- What inflation-linked bonds protect
- Individual bonds and bond funds