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Glossary

1915 Act, 1911 Act Bonds

The California name for Special Assessment bonds or Improvement Bonds, named, obviously, for the years in which the enabling legislature was approved. A special district is formed, public improvements (streets, curbs, gutters, water or sewer systems, etc.) are constructed, assessments are levied on all the properties in the district in proportion to the benefit derived from the improvement. Bonds are sold - without voter approval - and are repaid from the special assessments received. '15 Acts are callable on any interest payment date and are usually dated on the 2nd of the month instead of the 1st or the 15th. '11 Act bonds are payable from the assessments from one specific property and have a prior lien on that property in the event of default.

Accretion-Directed (AD)

A CMO class, deriving its cash flows form the interest accrual of a Z-Tranche. Because they derive their cash flows from the interest accrual of a Z-Tranche, Accretion Directed CMOs have little extension risk even in very low prepayment speed scenarios, and Accretion-Directed CMOs are also sometimes referred to as Very Accurately Defined Maturity (VADM) classes.

Accrued interest

Coupon interest accumulated on a bond or note since the last interest payment or, for a new issue, from the dated date to the date of delivery. Since interest on municipal bonds is payable semi-annually, every six months, when you buy a bond in mid-term you are only entitled to the interest the bond earns after you buy it. The interest earned previously, the accrued interest, belongs to the seller. Some first-time bond buyers think this payment is a hidden charge or fee, not realizing that they will get it back in full at the next interest payment date as tax-free interest.

Active Tranche

A CMO tranche that is currently paying principal payments to investors.

Ad Valorem Tax

(It actually means "according to its value.") A state or local government tax based on the value of real property as determined by the county tax assessor.

AD/Short Stated Maturity

An Accretion Directed CMO tranche receives principal payments from the interest that accrues on an Accrual or Partial Accrual class CMO (a Z-Bond). Because the principal payments are guaranteed by the interest from the Accrual bond, an AD bond has no extension risk and its maturity can be accurately defined even down to zero prepayments. AD bonds are also known as VADMs (Very Accurately Defined Maturity).

Adjustable Rate Mortgage (ARM)

A mortgage loan on which interest rates are adjusted at regular intervals according to predetermined criteria. An ARM?s interest rate is tied to an published interest rate index.

Advance Refunding

A financing structure under which new bonds are issued to repay an outstanding bond issue prior to its first call date. Generally, the proceeds of the new issue are invested in government securities, which are placed in escrow. The interest and principal repayments on these securities are then used to repay the outstanding issue until they are able to be called.

Advanced Refunded Bonds

A municipality may sell a second bond issue at a lower interest rate cost, placing the proceeds of the issue in an escrow account from which the first issue's principal and interest will be repaid when due. See also ETM bonds.

After-Tax Basis

The yield to maturity taking into account federal and state income taxes. This basis is used to compare returns of taxable bonds to the returns of tax-exempt municipal bonds.

Aftermarket

Exchange and over-the-counter markets where securities are bought and sold after the initial public offering. Aftermarket is also known as the Secondary Market.

Agency Bonds

Agency Bonds include debt securities issued by the U.S. Government Agencies or Government Sponsored Enterprise (GSE). Federally sponsored agencies are not guaranteed by the US Government but they do involve some level of federal sponsorship.

Agency Trade

A trade in which the broker/dealer acts as an agent, meaning that the broker/dealer will not act in the capacity of a principal and will charge a disclosed commission for the service of executing the trade.

Alternative Minimum Tax

A federal income tax levied to make certain that all taxpayers pay some tax. Municipal bonds that have been deemed non-essential to the public as a whole (usually airport or housing revenue bonds) may be subject to taxation if certain tax considerations are met by the investor. These certain tax considerations vary for each investor.

AMBAC

AMBAC Indemnity Corp. The number two-ranked municipal bond insurance company.

Amortization

The process of incrementally reducing a debt through installment payments of principal and interest. This also applies to reducing the premium paid for a bond by applying part of the interest payments to premium reduction.

Amortization of Debt

The annual reduction of principal through the use of serial bonds or term bonds with a sinking fund.

APY

Annual Percentage Yield is the effective annual rate of return, taking into account the effect of compounding interest. It is the annual rate of return for CDs.

Arbitrage

The interest rate differential that exists when proceeds from a municipal bond - which is tax-free and carries a lower yield - are invested in taxable securities with a yield that is higher. The 1986 Tax Reform Act made this practice by municipalities illegal solely as a borrowing tactic, except under certain safe-harbor conditions..

Ask Price

Price being sought for the security by the seller.

Assessed Valuation

A municipality's worth in dollars based on real estate and/or other property for the purpose of taxation, sometimes expressed as a percent of the full market value of the community.

Asset Backed

Bonds or notes backed by loan paper or accounts receivable originated by banks, credit card companies, or other providers of credit. Asset-Backed Securities are often enhanced by a bank letter of credit or insurance coverage.

Auction

The process of offering bonds up for bid and selling to the highest bidder.

Authority or Agency

A state or local unit of government created to perform a single activity or a limited group of functions and authorized by the state legislature to issue bonded debt.

Authorizing Ordinance

A law that when enacted allows the unit of government to sell a specific bond issue or finance a specific project.

Auto Loans

Asset Backed Securities collateralized by principal and interest payments of automobile loans.

Average life

The average length of time an issue of serial bonds and/or term bonds with mandatory sinking funds and/or estimated prepayments is expected to be outstanding. It also can be the average maturity of a bond portfolio.

Away From the Market

An order in which the limit bid is below the market value of the security or the limit offer is above the market value.

B.A.N. (Bond Anticipation Note)

A short-term security, one year or less, used for interim financing to be repaid from the proceeds of a planned long-term bond issue.

Baby Bond

A bond with a face value of less than $1,000, usually in $100 denominations.

Back Office

Terminology in the securities industry that refers to the firm's cashier and clearing operations, including the accounting and compliance departments.

Balloon

A large principal repayment in the later years of some serial bonds.

Balloon Maturity

An inordinately large amount of bond principal maturing in any single year. Also called a Term Bond.

Bank Qualified Bonds

Indicates if the bond has been designated a "Qualified Tax-Exempt Obligation".

Barrier %

The percentage of the Strike Price in the underlying asset, at which the option comes into existence (Knock-In) or ceases to exist (Knock-Out). Reverse Convertibles are normally issued with a Strike Price set on the Initial Pricing Date. If the underlying asset price closes, on any day, below the Downside Protection amount of the Strike Price, the option is triggered or "knocked in.? This percentage is sometimes referred to as "Downside Protection" or "Downside Cushion".

Base Point (or Basis Point)

One one-hundreth of one percent ( 1/100 % or 0.01 percent). Thus 25 basis points equal one-quarter of one percent, 100 basis points equal one percent. This is typical in-group, professional bond talk.

Base Price

The price of the bonds less any markup/markdown.

Basis Point

One one-hundredth of a percentage point. This is the most common measure of changes in bond yields.

Bear Market

A market trend that describes a sustained movement in the decrease of market.

Bearer Bond

A bond that has no identification of the owner of the security. It is presumed to be owned by the bearer or the person who holds it. It was much sought after because of the ease of transferring or gifting. All bonds issued prior to June 1983 were bearer bonds, since then, they have been issued in Registered Bond form.

Beneficial Owner

The customer who ultimately is the owner of a security, even if the security's title of ownership is in the name of a broker or bank ("street name").

Bid

An offer to buy at a fixed price or yield. As opposed to Ask, which is an offering to sell.

Bid Wanted (BW)

Notice that a holder of securities wants to sell and will entertain bids.

Blended Yield to Maturity (Interpolated)

The combination and average of two points on the yield curve to find a yield at the midpoint.

Blue-Sky Laws

State laws that require the registration of securities and the regulation of the offering and sale of securities in accordance with antifraud regulation.

Bon

. A unit of debt, $1000 of principal or par amount. For 200 years municipal bonds were sold in $1000 denominations. Since the mid-1970s the minimum bond denomination has been $5000, nevertheless, A Bond" is bought, sold, referred to and priced as if it were $1000.

Bond Counsel or Bond Approving Attorney

A lawyer who writes an opinion on the bond or note as to its tax exempt status and the authenticity of its issuance. In theory their opinion is meant to assure the bond investor, but they are paid by the issuer so it is not clear who their real client is.

Bond Equivalent Yield

A calculation for restating semiannual, quarterly or monthly discount bonds or notes yields into an annual yield.

Bond Fund (Tax-Exempt)

A portfolio of municipal bonds sponsored by registered investment companies that offer shares to investors either through (1) closed-end funds or unit investment trusts, which offer shares of a fixed portfolio of municipal bonds, or (2) open-end or managed funds, which offer shares in a managed portfolio of municipal bonds whose size will vary as shares are purchased or redeemed.

Bond Funds

Registered investment companies whose assets are invested in portfolios of bonds.

Bond Insurance

Insurance issued by a private insurance company for either an entire issue or specific maturities that guarantees to pay principal and interest when due. This will provide a credit rating of triple-A and thus a lower borrowing cost for the issuer. The four largest monoline bond insurers are AMBAC, FGIC, FSA and MBIA, which see.

Bond or note

A security whereby an issuer borrows money from an investor and agrees and promises, by written contract, to pay a fixed principal sum on a specified date ( maturity date) and at a specified rate of interest.

Bond Premium

The amount at which a bond or note is bought or sold above its par value or face value without including accrued interest.

Bond Rating

A grade given to bonds that indicate their credit quality. Standard & Poors, Moodys and Fitch are entities that provide ratings regarding a bond issuer?s ability to pay principal and interest in a timely fashion.

Bonded debt

The portion of an issuer's debt structure represented by outstanding bonds, sometimes limited by constitutional or legislative restraints.

Book Entry

A system of security ownership in which the ownership is held as a computer entry on the records of a central company for its owner. The bond owner gets a computer printout as proof of ownership.

Book Entry Bond

A bond that has no physical certificate, but records of the owner are kept by a depository and its members (banks and brokerage firms).

Broker

Technically a broker is a bond trader in the secondary market buying from and selling to bond dealers. Its most common usage is as a description of a bond salesperson.

Buffer %

The percentage between the strike price of the option on the underlying security and the price paid for the security. It is the percentage of price that the underlying security can change without resulting in a loss of principal.

Build America Bonds

Bonds issued by state and local governments as federally taxable governmental bonds with Federal subsidies for a portion of their borrowing costs. The program was created through the American Recovery and Reinvestment Act of 2009 to promote economic recovery and job promotion. The subsidies take the form of either tax credits provided to holders of the bonds or refundable tax credits paid to state and local governmental issuers of bonds. These bonds are considered Municipal bonds and MSRB rules are applicable for the sale and settlement of these bonds.

Build America Bonds ? Direct Payment

Provides a Federal subsidy through a refundable tax credit paid to state or local government issuers by the Treasury Department and the Internal Revenue Service in an amount equal to 35 percent of the total coupon interest payable to investors on these taxable bonds.

Build America Bonds- Tax Credit

Provides a Federal subsidy through Federal tax credits to investors of the bonds. The tax credit to the investor is in an amount equal to 35 percent of the total coupon interest payable by the issuer on taxable governmental bonds. The tax credits may be stripped and sold to other investors.

Bull Market

A market trend that describes a sustained market movement when prices are increasing in the market.

Bullet Bond

A bond with a fixed maturity and no call features.

Buy-In (Close ?Out)

When an investor is forced to purchase bonds because the seller did not deliver the securities in a timely manner or at all. The party failing to deliver bonds will be notified in writing. Bonds can then be purchased by the purchaser and the selling party is obligated to pay for any difference.

Call

The action taken to pay the bond principal and interest prior to the stated maturity date.

Call Premium

A dollar amount paid as a penalty or premium by an issuer who exercises the right to redeem securities

Call Protection

The period of time in which the bond cannot be called. Additionally, specifying a call protection date in the offering search screen will return bonds that will not be redeemed, mature, or be called until at least the date specified. Continuously callable bonds or those callable on 30 days notice will be excluded if a call protection date is specified.

Call Risk

The risk that declining interest rates may accelerate mortgage loan prepayment speeds, causing an investor's principal to be returned sooner than expected. As a consequence, investors may have to reinvest their principal at a lower rate of interest.

Callable bond

A bond or note that is subject to redemption at the option of the issuer prior to its stated maturity. The call date and call premium, if any, is stated in the offering statement or broker's confirmation.

Cap

The highest interest rate that can be paid on a floating-rate security.

CATS

CATS-Certificate of Accrual on Treasury Securities, refers to a zero-coupon U.S. Treasury issue that is sold at a deep discount from the face value and pays no coupon interest during its lifetime, but returns the full face value at maturity.

Certificate of Deposit

Certificates issued by banks with maturities that vary from a few weeks to several years. The bank agrees to pay a fixed interest rate until a specific maturity date. It is a time based bank deposit that pays interest.

Certificates of Participation (COPs)

A form of lease revenue bond that permits the investor to participate in a stream of lease payments, installment payments or loan payments relating to the acquisition or construction of specific equipment, land or facilities. In theory the certificate holder could foreclose on the equipment or facility financed in the event of default, but so far no investor has ended up owning a piece of a school house or a storm drainage system. A very popular financing device in California since Proposition 13 because COP issuance does not require voter approval. COPs are not viewed legally as "debt" because payment is tied to an annual appropriation by the government body. As a result, COPs are seen by investors as providing weaker security and often carry ratings that are a notch or two below an agency's general obligation rating.

CFD. Community Facilities District

If a bond issue name has CFD in it you know it is a Mello-Roos Bond. The name refers to the taxing District that is set up to authorize the issuance of bonds, that will benefit from the financing, and from which special taxes will be collected for the bonds' repayment.

Close-Out (Buy-In)

A procedure that allows dealers to complete a delivery of securities they have bought but not yet delivered. Firms can agree to cancel a trade or take a substitution if all parties agree. If bonds are not delivered by the close out date and no further arrangements have been agreed upon, then the purchasing party can buy bonds in the open market to complete the transaction at the expense of the party failing to deliver the bonds.

Closed End Fund

A mutual fund of a fixed-dollar amount of issues traded on one of the exchanges not at its NAV, but priced based on perception and supply and demand. These funds can sell at a substantial discount or premium to their net asset value.

Closing Quotation

The final bid and ask price for an issue at the end of the trading day.

Collar

Upper and lower limits (cap and floor, respectively) on the interest rate of a floating rate security.

Collateral

Assets pledged by a borrower until a loan is repaid. These assets are subject to seizure if the loan goes into default.

Collateralized Mortgage Obligations (CMOS)

Bonds backed by a pool of mortgage pass-through securities or mortgage loans. A type of mortgage backed security that creates separate traunches for different classes of bond holders with varying maturities.

Commercial Paper

Commercial Paper securities are short term obligations with maturities ranging from 2 to 270 days, issued by banks, corporations, and other short-term borrowers. Such instruments are unsecured and usually sold at a discount.

Commission

A fee paid to a broker when acting as an agent in a securities transaction.

Companion Tranche

A class of tranche found in a planned amortization class (PAC) bond that is responsible for protecting the PAC tranche from both contraction and extension risk. The companion bond is designed to absorb excess principal payments during times of high prepayment speeds and defer receiving principal payments during times of low prepayment speeds.

Compound Accreted Value

The value of a zero coupon bond at any given time, based on the principal, with interest compounded at a stated rate of return over time.

Concession

The compensation in an underwriting agreement paid to members of a selling group.

Conditional Call

A clause in the indenture of a security that permits the issuing entity to retire the security at a predetermined price, prior to maturity, based on certain events specified in the bond's indenture. Please see prospectus for details on the conditional calls pertaining to the bond prior to purchasing for your client. Some types of conditional calls - 'A' - 'Change of Control' 'B' - 'Drop in Receivables' 'C' - 'Sale of Equipment' 'D' - 'Destruction of Equipment' 'G' - 'Rating Downgrade' 'H' - 'Tax Law Change' 'I' - 'Stock Premium Inc.' (Callable if stock premium increases by certain amount over convertible bond price) 'J' - 'Proceeds of Stock Off.' (Callable with proceeds of common stock offering) 'Z' - 'Other'

Conditional Puts - Death of Holder

The 'Death Put', also known as 'Survivor Option' or 'Estate Option', is when the issuer is required to buy a bond back at par when the beneficial owner of the bond dies.

Conduit Bonds

Bonds whose repayment is the responsibility of the business or developer who benefits from the financing, rather than the issuer who only collects the taxes, fees or revenues and passes them on to the bondholder.

Confirmation

A written acknowledgement required to be sent to parties to a transaction to state the terms and execution of an agreement to buy or sell a security.

Constant Maturity Treasury Series (CMT)

The average yield of a range of U.S. Treasuries with various fixed maturities. The fiveand ten-year CMT are commonly used as indices on floating-rate notes whose rates are tied to long-term interest rates. The index may be found in the Federal Reserve H.15 Report.

Constant Prepayment Rate (CPR)

The percentage of outstanding mortgage loan principal that prepays in one year, based on the annualized rate of the Single Monthly Mortality (SMM), which reflects the outstanding mortgage loan principal that prepays in one month.

Continuously Callable Bond

These bonds are callable on any date after the first call date until its maturity. The issuer has the right to repurchase bonds back from the investor on any date.

Convertible Bond

A bond containing a provision that permits conversion to the issuer's common stock at some fixed exchange ratio.

Convexity

Measure of the sensitivity of the duration of a bond to changes in interest rates.

Corporate Bond

Company-issued debt instruments that are considered financial obligations of a corporation. Corporate bonds can be broken down into three categories; debentures, medium term notes, and commercial paper. Maturities on corporate bonds can range from three months to one hundred years, and credit quality of issuers will vary. Generally, corporate bonds are broken down into four sectors: industrial, financial, transportation, and utility. They can be issued in both callable and non-callable formats.

Cost of Funds Index (COFI), 11th District

The monthly weighted average cost of -interest paid on checking and savings accounts at institutions operating in Arizona, California and Nevada that are members of the 11th Federal Home Loan Bank District. Published on the last day of the month, the rate reflects the cost of funds for the prior month.

Coupon

The detachable part of a bond that evidences the rate of interest due and the interest payment date. In the good old days of bearer bonds, coupons were detached from the bonds and presented to the paying agent for payment just as one might cash a government check. Thus the reference to wealthy persons as "coupon clippers.

Coupon Frequency

The established date for the interest payment on a bond. Most bonds pay semi-annualinterest payments. There are also bonds that pay interest monthly, quarterly or at maturity.

Coupon rate

The specified annual interest rate payable to the bond or note holder as printed on the bond. This term is still used even though there are no coupon bonds anymore.

Coupon Rate

The stated annual interest rate on a security.

Covenant

A legally binding commitment by the issuer of municipal bonds to the bondholder. An impairment of a covenant can lead to a Technical Default.

Coverage

This is the margin of safety for payment of debt service on a revenue bond that reflects the number of times the actual and/or estimated project earnings or income for a 12-month period of time exceeds debt service that is payable.

CP Index

Usually the Federal Reserve Commercial Paper Composite calculated each day by the Federal Reserve Bank of New York by averaging the rate at which the five major commercial paper dealers offer "AA" industrial Commercial Paper for various maturities. Most CP-based floating-rate notes are reset according to the 30- and 90-day CP composites.

CPI-U

The Consumer Price Index for All Urban Consumers, published by the Bureau of Labor Statistics of the U.S. Department of Labor. It measures changes in the price of a basket of goods purchased by urban consumers.

Credit Card Receivables

Asset Backed Securities collateralized by credit card debt.

Credit Enhancements

Credit support purchased by an issuer from an entity other than a monoline insurer.

Credit Spread

A yield difference, typically in relation to a comparable U.S. Treasury security vs a non Treasury security that are identical in all respects except for quality rating.

Current Face

The current remaining monthly principal on a mortgage security. Current face is computed by multiplying the original face value of the security by the current principal balance factor.

Current Yield

The ratio of the coupon rate on a bond to the dollar purchase price expressed as a percentage. Thus if you pay par or 100 cents on the dollar for your bond and the coupon rate is 6%, the current yield is 6%, however, if you paid 97 for your 6% discount bond the current yield is 6.186%. ( .06 divided by 97). If you paid 102 for a 6% bond the current yield is 5.88% (.06 divided by 102).

Cushion Bonds

Bonds selling at a premium are called "cushion" bonds because they cushion the price volatility in an up and down market. By definition, a premium bond has a higher-than-market coupon interest rate. The dollar price movement of a high interest rate bond is less than that of a lower interest rate bond of the same maturity when general interest rates move up or down a few basis points.

CUSIP Number

The nine digit ID assigned to a bond by the Committee on Uniform Security Identification Procedures, which was established under the auspices of the American Bankers Association to develop a uniform method of identifying securities.

Custodial Receipt

An evidence of ownership of a security that is actually held by the transfer agent. The security is non transferable in this form.

Dated Date. (dtd.

The date carried on the face of a bond or note from which interest normally begins to accrue.

Day Order

An order that is valid only for the remainder of the trading day in which it was entered.

De Minimus Rule

Rule stating that capital gains must be paid if the bond was purchased at a discount to the face value in excess of a quarter point per year between the time of acquisition and maturity.

Deal Number

The industry standard name for a CMO or asset-backed deal. Freddie Mac Deal Numbers are simple chronological sequence numbers. Fannie Mae, Ginnie Mae and many private label CMOs and asset backed Deal Numbers consist of a hyphenated combination of the year of issuance and a sequence number, e.g., FNR 2005-47 represents the 47th Fannie Mae deal in 2005.

Dealer

A corporation or partnership that buys and sells and maintains an ongoing position in bonds and/or notes. They are also authorized to underwrite new issues. Some large commercial banks are licensed to act as bond dealers.

Dealer

An individual or firm acting as a principal rather than a broker or agent. An individual or entity, such as a securities firm, that acts as a principal and stands ready to buy and sell for its own account.

Debenture

Unsecured debt obligation, used against the general credit of a corporation, rather than against a specific asset.

Debt Limited

The maximum statutory or constitutional amount of debt that the general obligation bond issuer can either issue or have outstanding at any time.

Debt Ratio

The ratio of the issuer's general obligation debt to a measure of value, such as real property valuations, personal income, general fund resources, or population.

Debt Service

Required payments for principal and interest.

Debt Service Reserve Fund

A bank trustee account established by the trust indenture and used as a backup security for an issuer's bonds. It usually amounts to one year's debt service, and can be drawn on by the Trustee in the event of an impairment of the Trust indenture.

Deep Discount Bonds

Bonds selling for a price much less than the par value,. Bonds selling at an original issue discount are not included in this category.

Default

Failure to pay in a timely manner principal and/or interest when due, or a Technical Default, the occurrence of an event as stipulated in the Indenture of Trust resulting in an abrogation of that agreement. A Technical Default can be a warning sign that a default on debt service is coming, but in reality actual debt service interruption does not always occur if the problems are resolved in time. A Technical Default will almost always drive down the price of a bond in secondary market trading.

Defeased bond

. Refunded bonds for which the payment of principal and interest has been assured through the structuring of a portfolio of government securities, the principal and interest on which will be sufficient to pay debt service on the refunded, outstanding bonds. When a bond issue is defeased, the claim on the revenues of the issuer is usually eliminated. See also ETM bonds

Delinquent Taxes

Property taxes that have been levied but remain unpaid on and after the due date. In California, December 10 and April 10. Special taxes and assessments are often due on these dates as well. When tax delinquencies exceed 5% the Bond Advisor places the issue on its internal Bond Watch.

Delivery

For bonds bought or sold in the secondary market, delivery - and payment - must be in three business days. For new issues, the time when payment is made to, and the executed bonds and notes are received from, the issuer. New-issue delivery takes place several weeks after the sale to allow the bonds and notes to be printed and signed.

Denomination

The face or par amount - nominally $1000 or $5000 but can be $100,000 or more in the case of a note - that the issuer promises to pay at a specific bond or note maturity.

Direct debt

In general obligation bond analysis, the amount of debt that a particular local unit of government has incurred in its own name or assumed through annexation.

Discount

The amount of dollars by which market value of a bond is less than par value or face value.

Discount Bonds

Bonds which sell at a dollar price below par in which case the yield would exceed the coupon rate. The difference between the discount price and the maturity price is subject to federal capital gains tax except in the case of Original Issue Discount Bonds, which see.

Discount Margin

The effective spread to maturity of a floating-rate security after discounting the yield value of a price other than par over the life of the security.

Discount not

. Non-interest-bearing note sold at a discount and maturing at par. A U.S.Treasury Bill is a discount note.

Discount Note

Short-term obligations issued at discount from face value, with maturities ranging from overnight to 360 days. Interest is paid at maturity.

Discount Rate

The rate the Federal Reserve charges for loans to member banks.

Discount Yield

The yield on a security sold at a discount.

Dividend Rate

The fixed or floating rate paid on preferred stock.

Dollar Bond

Generally a term bond that is quoted and traded in dollars rather than in yield-to-maturity. They are well known issues of well known names in the market.

Dollar Price

The unit in which the market quotes a fixed-income security, usually stated as a percentage of the security's face value, the fractional component of which may be quoted in terms of decimals, 8ths, 32nds, or 64ths. The dollar price does not include accrued interest.

Double-barreled Bond

A bond with two distinct pledged sources of revenue, such as earmarked monies from a specific enterprise or aid payment, as well as the general obligation taxing powers of the issuer. A California GO Water Resources Bond would be a good example.

Double-Exemption Bonds

Bonds that are exempt from both state and federal income taxes.

Downgrade

The lowering of a bond's rating.

Downside Cushion

The percentage of the Strike Price in the underlying asset, at which the option comes into existence (Knock-In) or ceases to exist (Knock-Out). Reverse Convertibles are normally issued with a Strike Price set on the Initial Pricing Date. If the underlying asset price closes, on any day, below the Downside Protection amount of the Strike Price, the option is triggered or "knocked in".

Due Diligence

Investigation of a bond issue by bond counsel for underwriters and issuers to insure that all material information has been included in the official statement.

Duration

The linear measure of how the price changes in response to interest rate changes.

Embedded Option

An option that is an inseparable part of another instrument.

Emerging market

A financial market of a developing country, usually a small market with a short operating history.

Escrow Fund

A fund that contains monies that only can be used to pay debt service.

Escrowed Municipals

Proceeds from a new bond issue are held in a separate escrow account to pay off existing bond issue when it matures.

Escrowed to Maturity

Excess revenues from an issue are placed in an escrow account for the express purpose of ensuring payment of bonds at maturity. When funds in the escrow account are adequate to pay off the bond, it becomes escrowed to maturity.

ETM. Escrowed to Maturity

An Advanced Refunded bond. When interest rates fall, an issuer may chose to sell a new issue called a refunding issue and use the proceeds of the second issue to pay off the original issue, much the same as a home owner refinancing a mortgage in an effort to save interest costs. The proceeds of the refunding issue are used to structure a portfolio of U.S. government securities, the principal and interest payments of which exactly match the principal and interest payments of the refunded bonds. The portfolio is placed in escrow at the paying agent and the bond issue is said to be fully defeased and escrowed to maturity. In actual practice the bonds are usually called on the first call date. Because of the U.S. Treasury backing, ETM bonds are considered the safest municipal bonds available and trade on the market as a rich triple-A.

Exclude Bid Side Only

When searching for bonds, users expect to receive search results with an offer side only market and/or bonds that have a two-sided market. They do not expect to see bonds with a bid side only market on search results. This check box defaults to selected to prevent bonds with bid side only markets from being returned in search results.

EXMT AMT

The interest on these bonds is not considered tax preference items, and therefore is not used in calculations to determine potential liability to AMT.

Extension Risk

The risk that rising interest rates will slow the anticipated rate at which mortgages or other loans in a pool will be repaid, causing investors to find their principal committed longer than expected.

Face Amount

The value at maturity of a bond. This is also called par. The principal amount the bond will pay at maturity.

Factor

A decimal value reflecting the proportion of the outstanding principal balance of a mortgage security, which changes over time, in relation to its original principal value.

Factored Quantity

Factored quantity is the outstanding amount of pro rata bonds that pay down concurrently based on the proportion of the balance of bonds outstanding in the issue.

Fannie Mae

The Federal National Mortgage Association. A Government Sponsored Enterprise (GSE) of the US Government for the purpose of making and guaranteeing loans. Monthly principal and interest payments are guaranteed by FNMA but not directly by the U.S. Government.

FDIC TLGP Insured (Federal Deposit Insurance Corporation - Temporary Liquidity Guarantee Program)

Temporary Liquidity Guarantee Program ? a temporary FDIC guarantee of newly issued senior unsecured debt and the temporary and unlimited FDIC guarantee of the coverage of funds in non-interest bearing transaction accounts at FDIC insured institutions.

Feasibility Study

A financial study provide by the issuer of a revenue bond that estimates service needs, construction schedules, and most importantly, future project revenues and expenses used to determine the financial feasibility and creditworthiness of the project to be financed.

Fed Funds Effective Rate

The overnight rate at which banks lend funds to each other, usually as unsecured loans from regional banks to money center banks. The Fed Funds rate is the average dollar weighted rate of overnight funds.

Federal Financial Institutions Examination Council (FFIEC)

The Council is a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS), and to make recommendations to promote uniformity in the supervision of financial institutions.

Federal Funds Rate

The interest rate charged by banks on loans of their excess reserve funds to other banks. The Federal Reserve's ability to add or withdraw reserves from the banking system gives it close control over this rate.

Federal Reserve Bank

One of 12 central banks that make up the Federal Reserve System. These banks regulate money, banking and credit.

Federal Reserve Board

The governing board of the Federal Reserve System. Their responsibilities include setting bank reserve requirements, discount rates, implementing monetary policies, establishing regulations for banks and maintaining stability of the financial system.

FGIC. Financial Guaranty Insurance Co

The number three-ranked municipal bond insurer.

Financial Advisor

Generally a bank, investment-banking company or independent consulting firm that advises the issuer on all financial matters pertaining to a proposed issue and is not part of the underwriting syndicate.

Financial Sector Bonds

Bonds issued by companies in the financial sector may include: Banks, Finance, Insurance, Brokers, REITS, and Savings & Loans.

Firm Executable

This term applies to bids and offerings that are available for execution at the quoted price and quantity, usually for a limited period of time.

Firm Offerings

Securities offered for sale at firm prices.

First Call Date

The earliest date in a schedule of call dates, indicating the prices at which a bond can be called on each corresponding call date. This schedule accompanies the right of a bond issuer to redeem a bond before its maturity date.

Fiscal Agent

Also known as the Paying Agent, the bank, designated by the issuer, to pay interest and principal to the bondholder.

Fiscal Year

A 12-month time horizon by which state and local governments annually budget their respective revenues and expenditures. Usually not the calendar year, January to December, but often July to June.

Fitch Credit Ratings

A designation given by Fitch to indicate the relative credit quality, or the strength of the ability to pay a bond's obligation.

Fixed-Income Security

A security, such as a note or bond, that pays a stated rate of interest during the term of the security and returns principal at maturity.

Flat

A bond that is trading without accrued interest.

Floater

A bond sold with a variable or floating interest rate that changes at intervals ranging from one day to one year.

Floating-Rate Bond

A bond for which the interest rate is adjusted periodically according to a predetermined formula, usually linked to an index.

Floating-Rate CMO

A CMO tranche which pays an adjustable rate of interest tied to a representative interest rate index such as the London Interbank Offered Rate (LIBOR), the Constant Maturity Treasury (CMT), or the Cost of Funds Index (COFI).

Floor

The lower limit for the interest rate on a floating-rate bond.

Flow of Funds

The annual legal sequence by which enterprise revenues are paid out for operating and maintenance costs, debt service, sinking fund payments, and so on.

Foreign Issuer

Any issuer which is a foreign government, a national of any foreign country, or a corporation or other organization incorporated or organized under the laws of any foreign country.

Fourth Market

Trading of securities between investors who do not use the services of broker dealers or an exchange.

Freddie Mac (Federal Home Loan Mortgage Corporation)

A Government Sponsored Enterprise (GSE) that purchases residential mortgages in the secondary market and pools them for sale in the capital markets as mortgage backed securities.

Frequency

The interval of time (semi-annually, quarterly) at which interest payments are paid to the owner of a bond .

FSA. Financial Security Assurance Inc

The number four-ranked municipal bond insurer.

Full Faith and Credit

The pledge of "the full faith and credit and taxing power without limitation as to rate or amount." A phrase used primarily in conjunction with General Obligation bonds to convey the pledge of utilizing all taxing powers and resources, if necessary, to pay the bond holders.

General Obligation (GO) Bonds

Municipal bonds backed by the full faith and credit (taxing and borrowing power) of the municipality issuing the bonds.

General Obligation Bond. (G.O.

A bond secured by a pledge of the issuer's taxing powers (limited or unlimited). More commonly the general obligation bonds of local governments are paid from ad valorem property taxes and other general revenues. Considered the most secure of all municipal debt. Limited in California by Proposition 13 to debt authorized by a vote of two thirds of voters in the case of local governments or a simple majority for state issuance.

General Property Tax

A tax levied on real estate and personal property.

Gilt-Edged

A high grade bond issued by a blue chip company and meets its required payments of principal and interest with little risk of default.

Ginnie Mae I

Pass-through mortgage securities on which registered holders receive separate principal and interest payments on each of their certificates. Ginnie Mae I securities are single-issuer pools.

Ginnie Mae II

Pass-through mortgage securities on which registered holders receive an aggregate principal and interest payment from a central paying agent on all of their Ginnie Mae II certificates. Ginnie Mae II securities are collateralized by multiple-issuer pools or custom pools, which contain loans from one issuer, but interest rates that may vary within one percentage point.

Government Bonds

Bonds issued by governments or agencies of governments.

Government National Mortgage Association (GNMA)

Also known as "Ginnie Mae." A US Government owned corporation operated within the Department of Housing and Urban Development that provides guarantees on Mortgage Backed Securities backed by federally insured or guaranteed loans. The securities are the only mortgage backed securities guaranteed by the U.S. government.

Government Sponsored Enterprise (GSE)

Privately held corporations with the public purpose to reduce the cost of capital for certain borrowing sectors.

Grantor Trust

Special-purpose vehicle set up to issue fixed-rate capital securities and use the proceeds to purchase debt of the parent company.

Gross Debt

The sum total of a state's or local government's debt obligations.

Gross Revenues

Generally, all annual receipts of a revenue bond issuer prior to the payment of all expenses. Normally only Net Revenues are pledged to the repayment of bonds.

Hedge

An investment made with the intention of minimizing the impact of adverse movements in interest rates or securities prices and minimize exposure to market risk.

High Yield Bonds

Also called "junk bonds." These bonds are usually rated lower than BBB/Baa and are considered to have a higher risk of default. The yields are also higher on these bonds than on investment grade bonds.

High-Grade Bonds

Top-rated bonds, usually triple-A, that carry relatively little risk of default.

Home Equity Loans

The largest category of Asset Backed Securities, these securities are collateralized by home equity loans.

Hospital Revenue Bonds

Bonds issued by a municipal or state agency to finance construction maintenance oroperation of hospitals or nursing homes.

Housing Bonds

Bonds issued by a municipal or state agency to finance construction of single-family or multifamily housing.

IDC Financial Publishing Rank

Ranks are the opinion of IDC Financial Publishing, Inc. Ranks range from 1 (the lowest) to 300 (the highest) and fall into one of the following six groups: Superior (200-300) Banks rated Superior are simply the best by all measures. In addition to favorable capital ratios, most consistently generate ROE above COE. Excellent (165-199) Banks rated Excellent are strong institutions. Their ratios reflect quality management both from a balance sheet and income performance standpoint. Operating expenses and costs of funding are under control, producing a healthy return on equity (ROE). Average (125-164) Banks rated Average meet industry capital standards. When compared to excellent and superior rated banks, most exhibit lower quality loans and narrower profit margins. A specific problem is a low operating profit margin, and/or a large standard deviation in the operating profit margin. The marginal problems of the average bank require shifts in policies and practices to raise asset quality or improve profits. Below Average (75-124)Banks rated Below Average represent institutions under strain. Average loan delinquency is high. In some banks, liquidity ratios demonstrated risk. In many, excess high risk loans or assets are above the loan loss reserve and threaten equity capital. A specific problem is a low operating profit margin, and/or a large standard deviation in the operating profit margin. Return on financial leverage is negligible, on average, due to narrow (or negative) leverage spreads. Banks are also rated Below Average if they are deemed "Adequately Capitalized" per FDIC capital definitions. Lowest Ratios (2-74)This Lowest Ratios group contains some banks with less than minimum capital required. In some banks, liquidity ratios demonstrated risk. In many, increasing loan loss provisions expand net losses on the income statement and, along with the excess of net charge-offs, reduce capital ratios. A specific problem is a low operating profit margin, and/or a large standard deviation in the operating profit margin. A high number of failed banks were rated Lowest Ratios prior to failure. Banks are also rated Lowest Ratios if they are deemed "Under Capitalized" or "Significantly Under Capitalized" per FDIC capital definitions. Banks may also be rated Below Average if they are deemed "Adequately Capitalized" and have a high volatility in operating profit margins. Rank of One (1)Banks in the Rank of One group have the highest probability of failure. Loans 90-days past due, non-accrual loans, restructured loans, and other real estate owned, on average, exceed the loan loss reserve and equity capital by a wide margin. Liquidity ratios demonstrated risk. Without major balance sheet improvement, these banks will fail. Banks are also rated Rank of One if they are deemed "Critically Under Capitalized" per FDIC capital definitions. Each bank in the Bank Financial Quarterly has a one-line analysis of financial ratios and a one-number summary rank. IDCs' unique CAMEL analysis utilizes financial ratios that have a significant impact on the quality of banks: Capital risk is determined by Tier I capital as a percent of assets and as a percent of risk-based assets. Tier I & II capital as a percent of risk-based assets (risk-based capital ratio) measures credit and interest rate risk as well as estimates risks in the asset base. Asset quality is measured by the levels of loan delinquency, non-accrual loans, and high risk assets relative to loan loss reserves and capital ratios. Risk-adjusted assets as part of the risk-based capital ratio further define the quality of assets. Margins are the best measurement of management's financial controls. Margins represent the spreads between 1) operating profit and net operating revenues, 2) after-tax return on earning assets and cost of funding, and 3) the return on equity compared to estimated cost of equity capital, and 4) NOPAT return on equity compared to the cost of equity capital. Earning returns measure the success of the bank's operating strategy. Ratios of revenue yields from investments, loans, and non-interest income with comparison to operating costs, loan loss provision, net loan charge-offs, and net non-operating income ratios are the major components of the net operating after-tax return on earning assets (ROEA). Earnings from financial leverage measure the level of leverage and after-tax cost of funding compared to the after-tax return on earning assets (ROEA). Leverage returns measure the efficiency of the bank's financial strategy. Operating assets are financed with the leverage of deposits and borrowings to Tier I capital and its comparative cost. The leverage multiplier illustrates the degree of leverage, while the leverage spread measures its cost relative to operating returns (ROEA). Liquidity measures 1) balance sheet cash flow as a percent of Tier I capital and 2) illiquid loans compared to stable deposits and borrowings plus available lines of credit at the Federal Home Loan Bank. Leverage returns measure the efficiency of the bank's financial strategy. Operating assets are financed with the leverage of deposits and borrowings to Tier I capital and its comparative cost. The leverage multiplier illustrates the degree of leverage while the leverage spread me sures its cost relative to operating returns.

Indenture of Trust

A legal document describing in specific detail the terms and conditions of a bond offering, the rights of the bondholder, and the obligations of the issuer to the bondholder, such document is alternatively referred to as a bond resolution.

Index Linked

A bond that has a coupon rate that varies according to some underlying index

Industrial Bonds

Bonds issued by companies in the Industrial sector, which may include manufacturers of materials, energy, capital goods, consumer durables and non-durables.

Industrial Development Bonds. (IDBs

also called Industrial Revenue Bonds (IRBs). Used to finance facilities for private enterprises, water and air pollution control, ports, airports, resource-recovery plants, and housing, among others. The bonds are backed by the credit of the private corporation borrower rather than by the credit of the issuer. Also known as Conduit Bonds. Private purpose bonds are limited by federal law to $50 times the state's population on an annual basis.

Industrial Revenue Bonds

A security issued by a state, political subdivision or certain agencies or authorities, for certain specific purposes, but backed by the credit of a private enterprise.

Inflation Indexed Securities

Notes periodically issued by the US Government or GSEs whose return is adjusted with changes in the PPI or CPI.

Inflation Indexed Securities

Notes periodically issued by the US Government or GSEs whose return is adjusted with changes in the PPI or CPI.

Inflation-adjusted Principal

For an inflation-indexed security, the principal amount of the security, derived by multiplying the par amount by the applicable index ratio.

Inflation-adjusted Principal

For an inflation-indexed security, the principal amount of the security, derived by multiplying the par amount by the applicable index ratio.

Initial Offering Price

The price to an investor for a new bond. This is generally expressed as a percentage of face value. The bonds may not be sold at any lower price during the initial offering period.

Insured Bonds

Many municipal bonds are backed by municipal bond insurance that is specifically designed to reduce investment risk. In the event of a default, the insurance company guarantees payment of principal and interest to the investors for as long as the default lasts. Most insured bonds carry the highest quality credit rating.

Interchangeable Bonds

Bonds which can be converted from registered to coupon form, or vice versa, upon demand by the bearer.

Interest

Compensation paid for the use of money, usually expressed as a percentage rate.

Interest Rate

The annual percentage rate of interest paid on the principal of a specific issue of notes or bonds.

Interim Borrowing

(1) Short-term loans to be repaid from general revenues or tax collections during the current fiscal year (TRANs or RANs), (2) short-term loans in anticipation of bond issuance or grant receipts (BANs).

Intermediate Range

Bonds maturing in 5 to 15 years.

Inverse Floater

A CMO tranche that pays an adjustable rate of interest that moves in the opposite direction from movements on a representative interest rate index such as the London Interbank Offered Rate (LIBOR), the Constant Maturity Treasury (CMT) or the Cost of Funds Index (COFI). A bond that has an inverse relationship to short term interest rates.

Investment Banker

A firm engaged in raising capital for an issuer. Participates as the middleman in purchasing securities from the issuer and in selling the same securities to investors.

Investment Grade

Bond issues that the three major bond rating agencies, Moody's, Standard & Poor's, and Fitch rate BBB or Baa or better. Many fiduciaries, trustees, some mutual fund managers can only invest in securities with an investment grade rating.

IO (Interest Only) Security

In the case of a CMO, an IO tranche is created deliberately to pay only interest and not principal. IO securities are priced at a deep discount to the "notional" amount of principal used to calculate the amount of interest due.

Issue Date

The date on which a security is deemed to be issued or originated and interest begins to accrue.

Issue Description

The description of the bond listing title of the issue, name of issuer, coupon and maturity date.

Issuer

A legal entity that develops, registers and sells securities for the purpose of financing its operation.

Issuer

A state or local unit of government that borrows money through the sale of bonds and/or notes.

Joint Powers Authority (JPA)

A JPA is formed when it is to the advantage of two or more public entities with common powers to consolidate their forces to acquire or construct a joint-use facility. Their bonding authority and taxing ability is the same as their powers as separate units.

Jumbo Pools

Ginnie Mae II pass-through mortgage securities collateralized by pools that are generally larger and contain mortgages that are often more geographical diverse than single-issuer pools. Mortgage loans in jumbo pools may vary in terms of the interest rate within one percentage point.

Jump Z-Tranche

A Z-tranche that may start receiving principal payments before prior tranches are retired if market forces create a "triggering" event, such as a drop in Treasury yields to a defined level, or a prepayment experience that differs from assumptions by a specific margin. "Sticky" jump Z-tranches maintain their changed payment priority until they are retired. "Non-sticky" jump Z-tranches maintain their priority only temporarily for as long as the triggering event is present. Although jump Z-tranches are no longer issued, some still trade in the secondary market.

Junior Security

A security with a claim on a corporation's assets and income that is subordinate to that of a senior security. For example, common stock is junior to preferred stock, which is junior to unsecured debt such as debentures, which is junior to secured debt.

Junk Bond

A debt obligation with a rating of BB or lower, generally paying interest above the return on more highly rated investment grade bonds; sometimes referred to as high-yield bonds.

Junk Bonds

Most non-rated bonds and bonds rated below investment grade.

Lease-Rental Bond

Bonds whose principal and interest are payable exclusively from rental payments from a lessee. Rental payments are often derived from earnings of an enterprise that may be operated by the lessee or the lessor. Rental payments may also be derived from taxes levied by the lessee. Also see Certificates of Participation.

Legal Opinion

A written opinion from bond counsel that an issue of bonds was duly authorized and issued. The opinion usually includes the statement, interest received thereon is exempt from federal taxes and, in certain circumstances, from state and local taxes.

Letter of Credit

A form of supplement or, in some cases, direct security for a municipal bond under which a commercial bank or private corporation guarantees payment on the bond under certain specified conditions.

Level Debt Service

Principal and interest payments that, together, represent more or less equal annual payments over the life of the loan. Principal may be serial maturities or sinking fund installments.

Leverage

The use of borrowed money to increase investing power.

LIBOR

London Interbank Offered Rate. The rate banks charge each other for short-term Eurodollar loans. LIBOR is frequently used as the base for resetting rates on floatingrate securities.

Lien

A claim on revenues, assessments or taxes made for a specific issue of bonds.

Limit Order

A limit order is an order to buy a security at no more (or sell at no less) than a specific price. This gives the customer some control over the price at which the trade is executed, but may prevent the order from being executed.

Limited Tax Bond

A bond secured by a pledge of a tax that is limited as to rate or amount.

Liquidation Value

The amount a securities holder may receive in case of a liquidation of the issuer.

Liquidity

Capacity of a market to absorb a reasonable level of selling without significant losses.

Listed

Bonds that are listed and traded over the major exchanges: NYSE, AMEX.

Lockout

The period of time before a CMO investor will begin receiving principal payments.

Make Whole Call

A type of call provision allowing the issuer to pay off the remaining debt. The issuer must pay bondholders based on the net present value of all future coupon payments that would have been made. In this way, bondholders are "made whole.?

Mark-To-Market

The recording of the actual market values of securities.

Market

A pricing methodology used to sell the bond at its best price available at the time the order is filled.

Market Discount Point

Revised issue price less one quarter of a point for each whole year from purchase date to maturity. Used for calculations in the tax treatment of bonds issued at a discount.

Market Maker

A firm or person that accepts risk and is actively involved in making bids and offers in certain securities to facilitate trading in that security.

Market Order

An order placed to be executed at the current best available price.

Market Tone

A feeling or atmosphere regarding the trading in a market. If dealers and market makers are actively trading with narrow margins, the tone is considered good. When the trading is less active and spreads are larger, it is considered poor.

Marketability

A measure of the ease with which a security can be sold in the secondary market.

MarketView

MarketView is a price discovery tool, which aggregates several points of current market data including reported trades from TRACE or MSRB for a specific CUSIP, and comparable offerings on the BondDesk platform.

Marks-Roos Bonds

The State Legislature enacted the Marks-Roos (named after its legislative sponsors) Local Bond Pooling Act of 1985 to facilitate the financing of local government facilities by bond bank pools funded by bond proceeds. The pool, formed under a Joint Powers Authority, can buy any type of legally issued debt instrument within or without its geographic area. The idea was to save money through economies of scale by selling one large bond issue to finance several small projects. This in fact has not always happened. Many issues were high yielding, unrated, junk bonds that benefited no one but the bond underwriter. Several Marks-Roos issues have defaulted and are under investigation by the Securities and Exchange Commission. Prospective investors should find out what sort of loans the pooled fund will make before buying such deals.

Markup/Markdown

The fee charged by a dealer who buys or sells a security as principal and buys or sells it at a higher price. The fee is included in the price of the bond and is not listed separately in the order confirmation.

Maturity Date

The date when the principal amount of a security becomes due and payable.

Maximum Annual Debt Service

The maximum amount of principal and interest due by a revenue bond issuer on its outstanding bonds in any future fiscal year. This is sometimes the amount to be maintained in the Debt Service Reserve Fund.

MBIA. MBIA Insurance Corp

The first-ranked municipal bond insurer, based on insurance in force and market penetration.

Medium-Term Note

A debt security issued under a program that allows an issuer to offer notes continuously to investors through an agent. The size and terms of medium-term notes may be customized to meet investors' needs. Maturities can range from one to 30 years.

Mello-Roos Bonds

The Mello-Roos (named for its legislative sponsors) Community Facilities District Act of 1982 established another method whereby almost every municipal subdivision of the state may form a special, separate district to finance a long list of public facilities by the sale of bonds and finance certain public services on a pay-as-you-go basis. These Community Facilities Districts are formed and bond issues authorized by a two-thirds vote of the property owners in the district. Typically the only voters in a district are one or more real estate developers who own or have an option on all of the land in the district. These land-based financings were nicknamed "dirt bonds" by the Bond Advisor years ago. Bonds are sold to finance facilities that can include schools, parks, libraries, public utilities and other forms of infrastructure. The Districts may provide public services that include police and fire protection, recreation programs, area maintenance, library services, flood and storm drainage. Bonded debt service and/or the public services are paid for by special taxes levied on the real property within the district. As the developer subdivides and sells off the land the new property owner assumes the tax burden. Tax delinquencies can lead to fines and penalties and ultimately foreclosure and sale. The ultimate security for Mello-Roos bonds is the value of the real property being taxed, consequently a provision in the law requires the appraised value of the land be three times the bonded debt. Recent foreclosure sales have cast doubts on the skills of the appraisers, and underscore the riskiness of some of this debt when a severe real estate slump hits developers.

Minimum Amount to Invest

The dollar amount equal to the factor adjusted amount (or current face) of the offering.

Minimum Denomination

Dollar amount of one bond or the minimum dollar increment that can be purchased.

Minimum Denomination Quantity (Min Denom Qty)

The minimum amount required to create an order (minimum purchase amount).

Moody's Credit Ratings

Moody?s ratings are a measure of long term risk of each issuer?s ability to meet debt payments taking into account changes in management strategy, regulatory trends, and the next economic cycle or longer. Moody's uses a multidisciplinary or "universal" approach to risk analysis, which aims to bring an understanding of all relevant risk factors and viewpoints to every rating analysis. They rely on the judgment of a diverse group of credit risk professionals to weigh those factors in light of a variety of plausible scenarios for the issuer and thus come to a conclusion on what the rating should be.

Moody's Credit Ratings Moody’s ratings are a measure of long term risk of each issuer’s ability to meet debt payments taking into account changes in management strategy, regulatory trends, and the next economic cycle or longer. Moody's

Moral Obligation Bond

Moral Obligation Bond

A revenue bond, which in addition to its primary source of security, possesses a structure whereby a state pledges to make up shortfalls in a debt service reserve fund, subject to legislative appropriation. There is no legal obligation for the state to make such a payment, but market participants recognize that failure to honor the "moral" pledge would have negative consequences for the state's own creditworthiness.

Mortgage

A legal instrument that creates a lien upon real estate securing the payment of a specific debt.

Mortgage Banker

An entity that originates mortgage loans, sells them to investors and services the loans.

Mortgage Loan

A loan secured by a mortgage.

Mortgage Pass-through

A security representing a direct interest in a pool of mortgage loans. The pass-through issuer or servicer collects payments on the loans in the pool and "passes through" the principal and interest to the security holder on a pro rata basis. A bond backed by mortgages issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Government National Mortgage Association.

Mortgage Pass-through

A security representing a direct interest in a pool of mortgage loans. The pass-through issuer or servicer collects payments on the loans in the pool and "passes through" the principal and interest to the security holder on a pro rata basis. A bond backed by mortgages issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Government National Mortgage Association.

Mortgage Revenue Bond

A bond backed by a lien on the monthly payments of a large pool of mortgages, usually issued by a state or local housing authority.

Mortgage-Backed Security (MBS)

A bond backed by mortgages issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Government National Mortgage Association. The investors receive payments from the interest and principal payments made from the mortgages.

Multi Call Bond

These bonds are typically callable only on interest payment dates.

Municipal Bond

Bonds issued by any of the 50 states, the territories and their subdivisions, counties, cities, towns, villages and school districts, agencies, such as authorities and special districts created by the states, and certain federally sponsored agencies such as local housing authorities. Historically, the interest paid on theses bonds has been exempt from federal income taxes and is generally exempt from state and local taxes in the state of issuance. There are approximately $1.3 trillion municipal bonds outstanding and they generate about $50 billion tax-free interest income each year.

Municipal Bonds

Fixed income securities issued by state and local governments or their agencies.

Municipal Futures

A municipal index futures contract that has been traded at the Chicago Board of Trade since June 11, 1985. The futures contract is based on an index, known as The Bond Buyer Municipal Bond Index, composed of 40 bonds which are priced at the close of trading each day. This is no market for amateur speculators, it is used primarily by professional money managers to hedge their municipal portfolios.

Municipal Notes

Short-term municipal obligations, generally maturing in one year or less. The most common types are (1) bond anticipation notes (BANs), (2) revenue anticipation notes (RANs), (3) tax anticipation notes (TANs), (4) grant anticipation notes, (5) project notes, and (6) construction loan notes. Also see TRANs.

Municipal Securities Rulemaking Board (MSRB)

An independent self-regulatory organization established by Congress in 1975 which is charged with primary rulemaking authority - under the SEC - over dealers, dealer banks, and brokers in municipal securities. Its board is stacked against individual investors and it is little more than a sweetheart union for the municipal bond industry.

Mutual Funds

Mutual funds are an alternative investment vehicle. Some investors do not consider stocks and options a suitable investment due to their inexperience in selecting stocks or the inherent risks involved with options trading. For other traders, mutual funds may offer diversification

Narrowing the Spread

Also called "Closing the Market." The action taken by a dealer to reduce the difference between bids and offers.

NASDAQ

A computerized system that facilitates trading and provides price quotations on more than 5,000 of the more actively traded over the counter stocks.

Near Money

A bond that is close to its maturity date.

Negative Convexity

When the bond?s yield curve is concave. The rate of change of its duration measured as the second derivative of price with respect to yield.

Negative Credit Watch

A CreditWatch listing gives a rating agency's opinion regarding the potential direction of a rating and serves notice that there has or will be a change in creditworthiness. Being the object of a negative credit watch generally indicates the credit quality of a firm's debt has deteriorated and may be downgraded.

Net Asset Value (NAV)

The market value of all the bonds in a mutual fund portfolio divided by all the outstanding shares.

Net Bonded Debt

Gross general obligation debt less self-supporting general obligation debt, housing bonds, water revenue bonds, etc..

Net Interest Cost (NIC)

Generally speaking, issuers award competitive bond sales to the underwriter bidding the lowest NIC. It represents the average coupon rate weighted to reflect the time until repayment of principal and adjusted for the premium or discount.

Net Price

The total amount an investor pays for a bond.

Net Revenue Available for Debt Service

Usually, gross operating revenues of an enterprise less operating and maintenance expenses but exclusive of depreciation and bond principal and interest. Net revenue as thus defined is used to determine coverage on revenue bond issues.

New Issue

Securities that are publicly offered for the first time, whether in an IPO or as an additional issue of stocks or bonds by a company that is already public.

New Money

The amount of proceeds greater than the amount of the bonds being refunded.

New-Issue Market

Market for new issues of bonds and notes.

Next Auction Date

Date when the next interest/dividend rate will be determined.

Next Coupon

The date the next scheduled interest payment will be issued.

Noncallable

A bond that cannot be called either for redemption by or at the option of the issuer before its specified maturity date.

Notes

Short-term instruments to pay specified amounts of money, secured by specified sources of future revenues, such as taxes, federal and state aid payments and bond proceeds. Generally notes are issued with a maturity date ranging from one year to 10 years.

Notice of Sale

The announcement of a sale of a municipal bond at competitive bidding. The announcement will include the place, date and time of the sale, the principal amount and other information about the issue.

O.T.C. Over The Counter

The buying and selling method used in the secondary market for municipal bonds (and unlisted stocks). Not on an exchange.

Odd Lot

A trade made for less than the normal trading unit for that bond.

Offer

The price at which a seller will sell a security.

Offer is Spread

The offer retuned on an offer wanted request is spread to an underlying security. An offer price will move in conjunction with the price movements of the underlying security it is spread to.

Offer Wanted

A solicitation for a quote from an investor interested in buying a bond.

Offering Date

The first day a security is offered for sale to the public.

Offering Price

The price at which a new security is sold and the lowest price available for a round lot of securities.

Offering Scale

The price (expressed in eighths of a point) or yield (expressed in decimals) for each maturity of a serial bond. Used primarily with municipal bonds.

Official Notice of Sale

A paid announcement made by a municipality regarding an upcoming competitive bond sale.

Official Statement

The document an issuer provides detailing financial and other information about the issuer and the securities.

Official Statement (OS) or Offering Circular (OC)

A document (prospectus) circulated for an issuer prior to a bond sale with salient facts regarding the proposed financing. There are two OSs, the first known as the preliminary, or "red herring" - so named not because it smells but because some of the type on its cover is printed in red - and it is supposed to be available to the investor before the sale. The final OS must be sent to the purchaser before delivery of the bonds.

Open-End Fund

This is the standard municipal bond fund. It has no fixed number of bonds in its portfolio. Rather it buys issues as investors buy shares in the fund, sells issues as investors redeem shares. The tax-free dividend is dependent on a pro-rata share of the interest earned, and this varies as the income of the portfolio varies. The fund managers guarantee to buy back shares at their Net Asset Value, the market value of all the bonds in their portfolio as determined at the close of each business day. This NAV per share can be more or less than the original purchase price. Open-end funds have no maturity date so ultimately they must be sold to return principal.

Option-Adjusted Spread (OAS)

For a security with an embedded option, the yield spread over a comparable Treasury security after deducting the cost of the option.

Optional Redemption

A right to retire all or part of an issue prior to the stated maturity during a specified period of years, often at a premium. The right can be exercised at the option of the issuer.

Order

A commitment made to buy or sell a stated number of bonds at the offered price.

Original Face

The face value or original principal amount of a security on its issue date.

Original Issue Discount

Some maturities of a new bond issue that have an offering price substantially below par; the appreciation from the original price to par over the life of the bonds is treated as tax-exempt income and is not subject to capital gains tax. See also Zero Coupon Bond.

Original Issue Discount (OID)

The amount below par at which new securities are sold when first offered for sale.

Original Issue Discount Bond

A bond issued at a dollar price less than par that qualifies for special treatment under federal tax law. Under federal tax law for tax-exempt bonds, the difference between the issue price and par value is treated as tax-exempt interest rather than capital gain.

Original Issue Discount (OID)

The amount below par at which new securities are sold when first offered for sale.

Original Issue Discount Bond

A bond issued at a dollar price less than par that qualifies for special treatment under federal tax law. Under federal tax law for tax-exempt bonds, the difference between the issue price and par value is treated as tax-exempt interest rather than capital gain.

Original Issue Quantity

Original dollar amount or number of bonds of an issue.

Original Proceeds

The net amount received by an issuer after payment of all expenses that occurred during the issuance of the bond.

Over-the-Counter Market

Trading conducted outside an exchange.

Overlapping Debt

The proportionate share of the general obligation bonds of local governments located wholly or in part within the limits of the reporting unit of government that must be borne by property owners within the unit.

Overnight Position

The inventory a firm or trader holds at the end of the trading day.

Own

Limits search results to items offered by your firm on the BondDesk ATS.

P&I (Principal & Interest)

The term used to refer to regularly scheduled payments or prepayments of principal and of interest on mortgage securities.

P&I (Principal & Interest)

The term used to refer to regularly scheduled payments or prepayments of principal and of interest on mortgage securities.

PAC (Planned Amortization Class) Tranche

A CMO tranche that uses a mechanism similar to a sinking fund to determine a fixed principal payment schedule that will apply over a range of prepayment assumptions. The effect of the prepayment variability that is removed from a PAC bond is transferred to a companion tranche.

Par Value

The face value or principal amount of a bond, usually $5,000 due the holder at maturity. It has no relation to the market value. For pricing purposes it is considered 100.

Parity Bonds

Revenue bonds that have an equal lien on the revenues of the issuer.

Participation Class

The amount of leverage, usually expressed in percentage movement in the underlying asset, that characterizes the upside return of a Structured Product. Structured Notes often employ some degree of leverage or Enhanced Return on the upside, frequently combined with a cap on the return.

Participation Rate

The amount of leverage, usually expressed in percentage movement in the underlying asset, that characterizes the upside return of a Structured Product. Structured Notes often employ some degree of leverage or Enhanced Return on the upside, frequently combined with a cap on the return. The following is a list of the different types of participation: Straight Participation - Return is based on initial and final underlying levels; does not include averaging over more than 20% of the term of the investment. Participation Rate is fixed on pricing date. Averaging Participation - Return is based on periodic averaging for more than the final 20% of the term of the investment (tail averaging). Participation Rate is fixed on pricing date. Variable Participation - Participation Rate is not fixed on pricing date, and is dependent on changes in the underlying. Enhanced Participation - Positive investment return is based on change in underlying with a ratio greater than one.

Pass Through

A pass-through is a security representing pooled debt obligations repackaged as shares. The owner of a pass-through will receive income from the issuer, which itself receives income from the pooled group of debtors.

Paying Agent

Also Fiscal Agent. Generally a bank that performs the function of paying interest and principal for the issuing body.

Paying Agent

Place where principal and interest are payable, usually a designated bank or the office of the treasurer of the issuer.

Payment Date

The date that principal and/or interest payments are paid to the record owner of a security.

Perpetual Floating-Rate Note

A floating-rate note with no stated maturity date.

Perpetual Floating-Rate Note

A floating-rate note with no stated maturity date.

PO Security

In the case of a CMO, a PO tranche is created deliberately to pay investors principal only and not interest. PO securities are priced at a deep discount from their face value.

Point

An abbreviation for one percentage point. For a bond, a point is $10 per $1,000 bond.

Pool Number

A unique six-character identifying number for every MBS pass-through (pool). Pool numbers, assigned by the issuing agency, are the most commonly used identifier for pass-throughs. Freddie Mac pool numbers may be specified with a hyphen between the pool prefix (the first two characters), which identify the type of loan collateral in the pool and the rest of the pool number (e.g., ?C5-1234? or ?C51234?).

Pool Type

A description of the type of loans in an MBS pool, identifying, at least the issuing agency and original term.

Position

The status of an investor's securities in their portfolio.

Posted Since

The date offerings were put on the BondDesk ATS system. When entering search criteria, the search range can be defined by entering the least number of days (d), months (m) or years (y) to maturity in the POSTED SINCE field. For example, -1d would return all offerings added in the last day.

Pre-Refund

Bonds that will be called on the stated call (pre-refunded) date. The monies used to call the bonds are on deposit in an irrevocable escrow account from the proceeds of a more recent bond issue from the same issuer. Bonds are pre-refunded in order to take advantage of the lower interest rates, thus lowering the issuer's interest expense.

Preferred Stock

Stock that pays a specific dividend before any dividends are paid to common stock holders. A preferred stock takes precedence over common stock in the event of liquidation. Preferred stock usually does not carry voting rights.

Premium

The amount, if any, by which the price exceeds the principal amount (par value) of a bond. Its current yield will be less than its coupon rate.

Premium Bond

A bond with a price above the par value.

Premium Call

A provision that allows the issuer to call the bond prior to the maturity date at a price above the par value of the bond.

Prepayment

The unscheduled partial or complete payment of the principal amount outstanding on a mortgage or other debt before it is due.

Prepayment Risk

The risk that falling interest rates will lead to heavy prepayments of mortgage or other loans - forcing the investor to reinvest at lower prevailing rates.

Present Value

The value today of a sum of money available in the future based on a certain interest rate. This method allows investors to determine the amount of money to be invested to receive a specified amount in the future.

Price

The dollar amount per bond stated as a value of $100.

Price to Call

The yield of a bond priced to the first call date rather than maturity.

Primary Market

The new issue market

Prime Rate

The lowest interest rate charged by commercial banks to their best corporate customers.

Principal

The face value of a bond, exclusive of interest.

Principal Status

There are multiple levels of protection for the initial investment in a structured product: Principal Protected - Investor's principal amount will be returned at maturity, regardless of underlying performance. Partial Principal Protected - Investor is exposed to losses limited to less than the full principal amount. Buffered Principal at Risk - Investor's full principal amount is at risk, subject to some level of initial loss protection. Principal at Risk - Investor's full principal amount is at risk.

Principal Trade

A means of compensating the broker-dealer of a bond trade solely on the basis of a markup/markdown or spread established through purchasing and selling bonds for their own account.

Private Label

The term used to describe a mortgage security whose issuer is an entity other than a U.S. government agency or U.S. government-sponsored enterprise. Such issuers may be subsidiaries of investment banks, financial institutions or home builders.

Proceeds

The money received by a bond issuer at the close of the issuance of new securities.

Protective Covenants

The agreements imposing obligations on the bond issuer to protect the bondholders. Requirements included are segregation of funds and adequate debt service coverage among others.

Provisional Rating

A temporary credit rating of an issuer by a credit rating agency. The provisional rating is revised when the agency receives the complete financial information on the issuer.

Public Housing Authority Bonds

Tax-exempt bonds, backed by the federal government, issued by local housing authorities to finance public housing. No new bonds of this type have been issued since 1974.

Public Housing Authority Bonds

Tax-exempt bonds, backed by the federal government, issued by local housing authorities to finance public housing. No new bonds of this type have been issued since 1974.

Public Offering

The sale of securities to general investors. Corporate securities are filed with the Securities and Exchange Commission. Municipal securities are usually also filed with the Municipal Securities Rulemaking Board.

Put Bond

A bond that can be redeemed on a date or dates prior to the stated maturity date by the bondholder. Also known as an option tender bond.

Qualified Legal Opinion

Conditional affirmation of the legal basis for the bond or note issue. The average investor should avoid any but the strongest opinion by the most recognized bond approving attorneys.

Quantity in $ Face Value

The value of a bond paid back at maturity. Most bonds have a face value of $1,000; therefore $10,000.00 = 10 bonds.

Quantity in Bonds

The number of bonds (i.e. 10 bonds = $10,000.00 face value).

Quote Needed

Bonds that do not have prices can be bought or sold after placing a Quote Request. Once the quote is received, you can choose to buy or sell the bond.

Quote Wanted (QW)

Notice by a potential buyer of a security that he or she is looking for an offer by a potential seller of the security.

Range

A set of prices consisting of the opening price, high sale, low sale and current sale prices of the day for a given bond.

RANs

Revenue anticipation notes.

Rate Covenant

A legal commitment by a revenue bond issuer to maintain rates at levels to generate a specified debt-service coverage.

Rate of Return

The current yield or yield to maturity.

Rate Reset

The adjustment of the interest rate on a floating-rate security according to a prescribed formula.

Rating

A credit rating of a security provided by an independent rating agency.

Ratings

Various alphabetical and numerical designations used by institutional investors, Wall Street underwriters, and commercial rating companies to give relative indications of bond and note creditworthiness. Standard & Poor's and Fitch Investors Service Inc. use the same system, starting with their highest rating of AAA, AA, A, BBB, BB, B, CCC, CC, C, and D for default. Moody's Investors Services uses Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C, and D . Each of the services use + or - or +1 to indicate half steps in between. The top four grades are considered Investment Grade Ratings

Real Yield

For an inflation-indexed security, the yield based on the payment stream in constant dollars, i.e. before adjustment by the index ratio.

Realized Yield

The return on a bond, considering purchase price and reinvestment of the coupon payments at a stated rate of interest.

Record Date

The date for determining the owner entitled to the next scheduled payment of principal or interest.

Recovery Zone Economic Development Bonds? Direct Payment

Provides a deeper Federal subsidy through a refundable tax credit paid to state or local government issuers by the Treasury Department and the Internal Revenue Service in an amount equal to 45 percent of the total coupon interest payable to investors on these taxable bonds. The funds raised by the sale of these bonds must be used for one or more qualified economic development purposes in additional to other restrictions imposed by regulation.

Red Herring

A preliminary offering statement, subject to final change and update upon completion of sale of bonds. The name comes not from the smell but from the red type along the side on the cover.

Redemption

Process of retiring existing bonds prior to maturity from excess earnings or proceeds of refunding bonds. It also refers to redeeming shares in a mutual fund by selling the shares back to the sponsor.

Redemption Premium

The amount by which the "call" price of a security exceeds its principal, or par value.

Redevelopment Agency (Redev.)

A legislatively established subdivision of government established to revitalize blighted and economically depressed areas of a community and to promote economic growth. Tax Allocation Bonds are issued to pay the cost of land and building acquisition and their redevelopment and are repaid by the incremental increase in tax revenues produced by the increase assessed value of the area after redevelopment. Redev. Agencies may also sell Housing Mortgage Revenue Bonds to finance housing units within the area, a fixed percentage of which must be for low-cost housing.

Reference Ticker

The underlying asset or index the structured product is linked to. The most popular underlyings used are single stock, domestic and international equities indices, commodities, and currencies. Other underlying reference assets can be baskets of individual shares, indices of house prices, the prices of managed funds including hedge funds, and a variety of other financial assets.

Refunding

The redemption of a bond issue by a new bond issue at conditions generally more variable to the issuer.

Refunding Bond

The issuance of a new bond for the purpose of retiring an already outstanding bond issue.

Registered Bond

A non-negotiable instrument in the name of the holder either registered as to principal or as to principal and interest.

Registered Owner

The name in which a security is registered, as stated on the certificate or on the books of the paying agent. Principal & Interest payments are made to the registered owner on the record date.

Registrar

The party responsible for maintaining records of the beneficial owners of a security on the behalf of a bond issuer.

Regular Way Trade

A trade that is settled through the regular settlement cycle for that instrument. The cycle is the time that the regulations of the secondary market allows for the buyer to complete payment for the seller to deliver the goods being purchased. Settlement cycles are determined by the asset class.

Reinvestment Risk

The risk that interest income or principal repayments will have to be reinvested at lower rates in a declining rate environment.

REMIC

Real Estate Mortgage Investment Conduit. A complex pool of mortgage securities created to acquire collateral. A fixed pool of mortgages broken apart and sold as individual securities.

Repo

A financial transaction in which one party "purchases" securities (primarily U.S. Government bonds) for cash and simultaneously the other party agrees to "buy" them back at some future time according to specified terms. Municipal bond and note issuers have used repos to manage cash on a short term basis. (Known formally as repurchase agreements.)

Reset Frequency

Indicates the frequency of the interest payments.

Residual

In a REMIC, the residual is that tranche which collects any cash-flow from the collateral that remains after obligations to the other tranches have been met.

Restricted States

A field for identifying states where commercial agreements or state laws prevent the sale of CD?s to residents of the particular state.

Retail Lottery Bonds

A CMO class, created for retail investors, which trades with a one factor. In contrast to most tranches, where every investors current principal balance pays down in proportion to the tranche as a whole, individual lots of retail lottery bonds always trade with a one factor until they are called at random.

Revenue Bond

A municipal bond whose debt service is payable solely from the revenues derived from operating the facilities acquired or constructed with the proceeds of the bonds.

Revenue Bonds

Revenue bonds are issued to finance projects or enterprises in which the bond issuers pledge to the bondholders the revenues generated by the financed projects. Revenue bonds can be used to finance hospitals, water and sewage systems, tunnels, bridges, and turnpikes. Revenues can come from user fees and tolls and are used to repay the bonds.

Revised Issue Price

The original issue price plus any accrued original issue discount.

Round Lot

A unit of trading or a multiple of that unit. Typically $100,000 is the measure of a round lot of bonds.

Rules of Fair Practice

The regulations governing the conduct of the members of the FINRA.

S&P Credit Ratings

Standard & Poor's issues credit rating based on the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs.) It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated.

S&P Credit Ratings

Standard & Poor's issues credit rating based on the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs.) It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated.

Safekeeping

The storage and protection of customers' securities, typically held in a vault, provided as a service by a bank or institution acting as agent for the customer.

Scale

The coupon rates, offering prices and yields for each maturity of a serial bond.

Secondary Market

The trading market for outstanding bonds and notes. This is an O.T.C. market, a free form negotiated method of buying and selling, usually conducted by telephone or computer. Traders buy and sell for their own inventory. As many as $2 billion of issues trade each day.

Secured Debt

Debt backed by specific assets or revenues of the borrower. In the event of default, secured lenders can force the sale of such assets to meet their claims.

Secured Obligation

A debt backed by physical assets. The repayment of the interest and principal can be provided by these assets in the case of default.

Securities Act of 1933

Federal legislation designed to protect the public in the issuance and distribution of securities by requiring registration of a security with the SEC and full disclosure of accurate information about an issue.

Securities and Exchange Commission (SEC)

A federal agency created in the Securities Exchange Act of 1934 to oversee the Securities Act of 1933. The SEC promotes full disclosure and fair practices by the securities market.

Securities and Exchange Commission (SEC)

A federal agency created in the Securities Exchange Act of 1934 to oversee the Securities Act of 1933. The SEC promotes full disclosure and fair practices by the securities market.

Securities Exchange Act of 1934

Federal legislation created to provide governance of securities transactions in the secondary market and to regulate exchanges and broker dealers in order to protect the investing public.

Security

The legally available revenues and assets that are used to pay the bond holders. The key component that supports debt service.

Self Supporting Bonds

Bonds payable from the earnings of a municipal utility enterprise.

Senior Securities

Bonds and other debt obligations, fixed-rate capital securities and preferred stock that are considered senior to common stock within an entity's capitalization structure.

Sequential Pay REMIC

The most basic type of REMIC, in which all tranches receive regular interest payments, but principal payments are directed initially only to the first tranche until it is completely retired. Once the first tranche is retired, the principal payments are applied to the second tranche until it is fully retired and so on.

Serial Bond

A bond of an issue that features maturities every year, annually or semiannually over a period of years, as opposed to a Term Bond, which is a large block of bonds maturing in a single year.

Servicing

Collection and pooling of principal, interest, and escrow payments on mortgage loans and mortgage pools, as well as certain operational mortgage loans and mortgage pools, as well as certain operational procedures such as accounting, bookkeeping, insurance, tax records, loan payment follow-up, delinquency loan follow-up and loan analysis. The party providing the servicing receives a servicing fee.

Servicing Fee

The amount retained by the mortgage servicer from monthly interest payments made on a mortgage loan.

Settlement Date

The date on which a security is delivered in exchange for funds.

Short Position

An inventory position that reflects the sale of bonds that are not owned at the time of the sale.

Short Sale

A sale of securities not owned by the seller at the time of the transaction. This sale requires the purchase of the securities at a time in the future to cover the trade. A seller is usually expecting the price of the security to decline when a short sell is made.

Short term

Bonds or notes sold on an interim basis with tax-exempt securities for a period of from one to five years.

Short-Term Debt

Debt with a maturity of less than one year.

SIFMA (Securities Industry and Financial Markets Association)

An association that represents firms in financial markets. They are committed to enhancing the public?s trust and confidence in the markets.

Single Call Bond

These bonds are only callable at one specific future date.

Sinker

A bond with a sinking fund.

Sinking Fund

Money set aside on a periodic basis to retire term bonds at or prior to maturity.

Sinking Fund Schedule

A schedule of payments required under the original revenue bond resolutions to be placed each year into a special fund, called the sinking fund, and to be used for retiring a specified portion of a term bond issue prior to maturity.

SMM Single Monthly Mortality

The percentage of outstanding mortgage loan principal that prepays in one month.

SMM Single Monthly Mortality

The percentage of outstanding mortgage loan principal that prepays in one month.

SMMEA

Secondary Mortgage Market Enhancement Act of 1984

SMMEA Securities

Securities that are both ultimately secured by a first-lien mortgage loan and rated in one of the top two rating categories by at least one nationally recognized statistical rating.

Special Assessment Bond

A bond secured by a compulsory levy of special assessments, as opposed to property taxes, made by a local unit of government on certain properties to defray the cost of local improvements and/or services that represents the specific benefit to the property owner derived from the improvement. In California these are usually 1915 Act or 1911 Act Bonds.

Special Obligation Bonds

Bonds that are secured with a specific source of revenues.

Special Tax Bond

A bond secured by a special tax, such as a gasoline tax.

Spread

The difference between the bid and asked prices for a bond.

Standard Prepayment Model

A model based on historical mortgage prepayment rates that is used to estimate prepayment rates on mortgage securities. The model is based on the Constant Prepayment Rate (CPR), or the amount of outstanding principal that is prepaid in a month.

State (Municipal Bonds Only)

The state in which the bond was issued.

Stepped Coupon

A bond with a coupon rate that increases periodically, until it is called or matures.

Street Name

The registration of bonds in the name of a dealer or other third party instead of the owner, usually for custodial or safe keeping purposes. This also facilitates buying and selling from the account. The bond holder gets a monthly statement of the bonds in the account.

Stripped

Removing the coupons from a bond and then selling parts separately as a zero coupon or and interest only product.

Structured Note

Securities derived from or based on a single security, a basket of securities, an index, a commodity, a debt issuance and/or a foreign currency.

Structured Product

Securities whose cash flow characteristics depend upon one or more indices or that have embedded forwards or options or securities where an investor's investment return and the issuer's payment obligations are contingent on, or highly sensitive to, changes in the value of underlying assets, indices, interest rates or cash flows.

Subj AMT

Subject to AMT designates whether a municipal issue will be subject to Federal Alternative Minimum Income Tax.

Subject Offerings

Indications of offerings that are contingent on availability and / or other criteria, and must be verified before order execution can take place.

Subordinated Securities

Securities with a promise to pay that cannot legally be fulfilled until payments on certain other obligations have been made.

Super PO

A principal-only security structured as a companion bond.

Super Sinker

A term maturity in a housing mortgage bond issue. These will be the first bonds to be called, on any interest payment date, from the proceeds of prepaid mortgages. The average mortgage is prepaid though refinancing or sale in 6.8 years. While it is likely, it cannot be guaranteed that a super sinker will be called; as a result they are priced as a long-term bond but are most likely to be a short-term maturity. It is a way to get a higher yield for a short term bond.

Superfloater

A floating-rate REMIC tranche whose rate is based on a formulaic relationship to a representative interest rate index.

Support (Also known as Companions)

A class of tranche found in a planned amortization class (PAC) bond that is responsible for protecting the PAC tranche from both contraction and extension risk. The companion bond is designed to absorb excess principal payments during times of high prepayment speeds and defer receiving principal payments during times of low prepayment speeds.

Survivor

Optional redemption feature on a debt instrument allowing the beneficiary of the estate of the deceased to put (sell) the bond (back to the issuer) in the event of the death or legal incapacitation of the holder of the debt instrument. Also known as an Estate Feature or Death Put.

Swap

The exchange of one bond for another. Generally, the act of selling a bond to establish an income tax loss and replacing the bond with a new item of comparable value.

Symbol

A code representing a particular security listed on an exchange or otherwise publicly traded.

T-Bill Rate

The weekly average auction rate of the three-month Treasury bill stated as the bond equivalent yield.

TAC Tranche - Targeted Amortization Class

Targeted amortization class tranche. A TAC tranche uses a mechanism similar to a sinking fund to determine a fixed principal payment schedule based on an assumed prepayment rate. The effect of prepayment variability that is removed from the TAC tranche is A type of credit derivative that is similar to a planned amortization class (PAC) in that it protects investors from prepayment; however, it is structured differently than a PAC. TACs protect investors from a rise in the prepayment rate or a fall in interest rates. They do not protect from a fall in the prepayment rate like PACs.

TAC Tranche - Targeted Amortization Class

Targeted amortization class tranche. A TAC tranche uses a mechanism similar to a sinking fund to determine a fixed principal payment schedule based on an assumed prepayment rate. The effect of prepayment variability that is removed from the TAC tranche is A type of credit derivative that is similar to a planned amortization class (PAC) in that it protects investors from prepayment; however, it is structured differently than a PAC. TACs protect investors from a rise in the prepayment rate or a fall in interest rates. They do not protect from a fall in the prepayment rate like PACs.

Take Delivery

The action by which an instrument is tendered and received by the purchaser.

TAN

Tax Anticipation Note.

Tax Allocation Bond

Bonds issued in conjunction with a redevelopment project. The taxes pledged to their repayment come from the increase of assessed value over and above a pre-established base. The redevelopment creates this added value, known as the tax increment.

Tax Base

The total resource of the community that is legally available for taxation.

Tax Exempt In

Indicates the state of issuance for tax-exempt offerings by state code.

Tax-exempt Bond

Bonds exempt from federal income, state income, or state tax and local personal property taxes. This tax exemption results from the theory of reciprocal immunity: States do not tax instruments of the federal government and the federal government does not tax interest of securities of state and local governments.

Taxable Bonds

Bonds with interest that is taxable on the federal level and possibly the state and local level as well.

Taxable Equivalent Yield

The yield an investor would have to obtain on a taxable corporate or U.S. government bond to match the same after-tax yield on a municipal bond. This emuni.com site has a taxable equivalent yield table for California residents.

Technical Default

Failure by the issuer to meet the requirements of a bond covenant. These defaults do not necessarily result in losses to the bond holder. The default may be cured by simple changes of policy or actions by the issuer.

Telephone Bonds

Bonds issued by companies in the Telephone sector, which may include regional and long distance telecommunication service providers.

Tender

The act of offering bonds to a sinking fund.

Term Bond

A large block of bonds of long maturity. They may be part of a serial Bond issue; there may be more than one term bond in an issue or a single maturity. Some are subject to a sinking fund redemption.

Term Funding

A financing done to meet specific cash-flow needs for a specific period of time.

Territorial Bonds

Issued by Puerto Rico, the Virgin Islands, etc. Interest on this debt is exempt from state income taxes because of Congressional action that provides these territories with such benefits.

Territories

Commonwealth countries associated with the US such as Puerto Rico or unincorporated territories of the US such as Guam, who issue municipal debt.

Thin Market

The scarcity of secondary market supply or few bid or offer quotes for a particular security.

Tight Market

A condition in the secondary market with active trading and narrow spreads between asked and bid prices.

TIPS

Treasury Inflation Protected Securities are a special type of Treasury note or bond that offers protection from inflation. Coupon payments and underlying principal are automatically increased to compensate for inflation by tracking the consumer price index (CPI).

Tombstone

An advertisement placed for information purposes, after bonds or notes are sold, that describes certain details of the issue and lists the managing underwriters and the members of the underwriting syndicate.

Total Bonded Debt

The total amount of debt outstanding for a state or local government regardless of the purpose of the debt.

Total Return

The return on an investment, including income from dividends and interest, as well as appreciation or depreciation in the price of the security, over a given time period.

Trade Date

The official date on which a bond transaction occurs.

Trader

A person or firm engaged in buying or selling bonds.

Trading Position

The holding of bonds in inventory by the dealer for purposes of buying or selling.

TRAN

Tax and Revenue Anticipation Note.

Tranche

A portion of a deal or structured financing. This portion is one of several related securities that are offered at the same time but have different risks, rewards and maturities.

Tranche Name

The unique two-character name of a CMO tranche. The Issuer, Deal Number, and Tranche Name uniquely identify every CMO.

Transfer Agent

A party appointed by an issuer to maintain records of securities owners, to cancel and issue certificates and to address issues arising from lost, destroyed or stolen certificates.

Transportation Bonds

Bonds issued by companies in the Transportation sector, which may include railroads, truckers, and air freight.

Treasury Bills

A U.S. Government security with a maturity of one year or less. T-Bills are purchased at a discount to the full face value, and the investor receives the full value when they mature. The difference or "discount" is the interest earned. T-Bills are issued in denominations of $10,000 (auction) and $1,000 increments thereafter.

Treasury Bonds

Long-term obligations of the U.S. Government backed debt. that mature in excess of ten 10 years. Interest is paid semi-annually, and the bonds can be purchased in minimum denominations of $1,000 or multiples thereof.

Treasury Investment Growth Receipt (TIGR)

A US Treasury bond that has been stripped of its coupons, with ownership of individual coupons, or of bond principal sold at a discount as a zero coupon. All interest is paid at maturity. They are backed by the US Government.

Treasury Investment Growth Receipt (TIGR)

A US Treasury bond that has been stripped of its coupons, with ownership of individual coupons, or of bond principal sold at a discount as a zero coupon. All interest is paid at maturity. They are backed by the US Government.

Treasury Notes

U.S. Government debt obligations that are available for terms of one to 10 years with a fixed interest rate. Interest is paid twice a year, or semiannually, and the bonds can be purchased in denominations of $1,000 or multiples thereof.

Treasury STRIPS

U.S. Treasury zero coupon fixed income securities standing for Separate Trading of Registered Interest and Principal of Securities. These securities are sold at a discount, and they redeem for their full face value at maturity.

Trigger

The market interest rate at which the terms of a security might change. Triggers are common on index amortization notes and range securities.

Trustee

A bank designated as the custodian of funds and official representative of bondholders. Trustees are appointed to insure compliance with the trust indenture and represents bondholders to enforce their contract with the issuer.

Undated Issue

A floating-rate note with no stated maturity date.

Underlying Asset

All structured products provide a return based on the performance of some underlying reference asset or index. The most popular underlyings used are single stocks, domestic and international equity indices, commodities, and currencies. Other underlying reference assets can be baskets of individual shares, indices of house prices, the prices of managed funds including hedge funds, and a variety of other financial assets.

Underlying Debt

The general obligation bonds of smaller units of local government within a given issuer's jurisdiction.

Underlying Rating

In the case of a security for which credit enhancement or insurance has been obtained, the underlying rating is assigned by a rating agency to such security without regard to credit enhancement or assigned to other securities of the same issuer having the same features and security structure but without the credit enhancement.

Underwriter

An agreement to purchase an issuer's unsold securities at a set price, thereby guaranteeing the issuer proceeds and a fixed borrowing cost.

Unit Investment Trust (UIT)

A mutual fund of a fixed number (20 to 30) of different issues in a portfolio placed in a trust. Units or shares are sold in the trust and each unit receives a proportionate amount of the tax-exempt interest earned by the bonds. As the bonds mature or are called, principal is returned to the investor. UITs, unlike other mutual funds, have a finite life.

Unlimited Tax Bond

A bond secured by the pledge of taxes that are not limited by rate or amount.

Upgrade

An improved credit rating issued by a rating company.

Utility Bond

Bonds issued by companies in the utility sector, which may include electric, gas & water utility companies.

Variable Rate Bond

A bond whose yield is not fixed but is adjusted periodically according to a prescribed formula.

Volatility

The propensity of a security's price to rise or fall.

Weighted Average Coupon (WAC)

The weighted average interest rate of the underlying mortgage loans or pools that serve as collateral for a security, weighted by the size of the principal loan balances.

Weighted Average Coupon (WAC)

The weighted average interest rate of the underlying mortgage loans or pools that serve as collateral for a security, weighted by the size of the principal loan balances.

Weighted Average Coupon (WAC)

The weighted average interest rate of the underlying mortgage loans or pools that serve as collateral for a security, weighted by the size of the principal loan balances.

Weighted Average Loan Age (WALA)

A dollar-weighted average measuring the age of the individual loans in a mortgage pass-through or pooled security, such as Ginnie Mae or a Freddie Mac security. The WALA is measured as the time in months since the origination of the loans, with the weighting based on each loan's size in proportion to the aggregate total of the pool..

Weighted Average Loan Age (WALA)

A dollar-weighted average measuring the age of the individual loans in a mortgage pass-through or pooled security, such as Ginnie Mae or a Freddie Mac security. The WALA is measured as the time in months since the origination of the loans, with the weighting based on each loan's size in proportion to the aggregate total of the pool..

Weighted Average Maturity (WAM)

The weighted average of the time until all maturities on mortgages in a mortgage-backed security (MBS). The higher the weighted average to maturity, the longer the mortgages in the security have until maturity. Also known as "average effective maturity".

Weighted Average Maturity (WAM)

The weighted average of the time until all maturities on mortgages in a mortgagebacked security (MBS). The higher the weighted average to maturity, the longer the mortgages in the security have until maturity. Also known as "average effective maturity".

Window

In a REMIC bond, the period of time between the expected first payment of principal and the expected last payment of principal.

Yield

The income return on an investment expressed on an annual percentage. The basis on which a bond is priced and sold. It reflects the value of the bond giving consideration to the length of time to maturity, credit quality of the issuer/guarantor, and general market conditions.

Yield Curve

Graph depicting the relationship between yields and current maturity for securities with identical default risk.

Yield Spread

The difference in yield between two bonds or bond indices.

Yield to Call (YTC)

The yield of a bond or note if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. The calculation of yield to call is based on the coupon rate, the length of time to the call date and the market price.

Yield to Maturity (YTM)

The rate of return anticipated on a bond if it is held until the maturity date. YTM is considered a long-term bond yield expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupons are reinvested at the same rate. Sometimes this is simply referred to as "yield" for short.

Yield to Par Call

The yield of a bond or note if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. The calculation of yield to call is based on the coupon rate, the length of time to the call date and the market price.

Yield to Worst (YTW)

The lowest potential yield that can be received on a bond without the issuer actually defaulting. The yield to worst is calculated by making worst-case scenario assumptions on the issue by calculating the returns that would be received if provisions, including prepayment, call or sinking fund, are used by the issuer. This metric is used to evaluate the worst-case scenario for yield to help investors manage risks and ensure that specific income requirements will still be met even in the worst scenarios.

Yield-to-call

Return available to call date taking into consideration the current value of the call premium, if any.

Yield-to-maturity. (YTM

Return available taking into account the interest rate, length of time to maturity, and price paid. It is assumed that the coupon reinvestment rate for the life of the bonds will be the same as the yield-to-maturity.

Z-Tranche/ Z-Bond

A special type of bond class in a sequential pay collateralized mortgage obligation. This class of bond does not receive any interest or principal payments until all other tranches have been completely paid off. In a Z-tranche, the interest that is not paid is accrued and added to the principal for future interest calculation purposes. The main purpose of the Z-tranche is to speed up the maturity of the senior tranches by disbursing payment that the Z-tranche was suppose to receive to the higher priority tranches. Investors that possess long-term liabilities or those who worry about reinvestment risk would benefit from investing in a Z-tranche bond

Zero Coupon

A debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.

Zero-coupon Bonds

A deep discount municipal bond on which no current interest is paid. Instead, at bond maturity, the investor receives compounded interest at a specified rate. The difference between the discount price at purchase and the accreted value at maturity is not taxed as a capital gain but is considered tax-exempt interest. Widely used for college savings bonds.

Bond Swapping

A bond swap is a technique whereby an investor chooses to sell a bond and simultaneously purchase another bond with the proceeds from the sale. Fixed-income securities make excellent candidates for swapping because it is often easy to find two bonds with similar features in terms of credit quality, coupon, maturity and price.

Duration

Duration is the time it takes for an investor to be repaid the price for a bond by the bond's total cash flows.

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