Accreted Value: the increase in a bond price which is due to interest earned. This occurs with discounted securities and zeros.

Asset Backed Securities: bonds with an asset of some form (e.g. credit card debt, auto loans) as collateral.

Accrued interest: interest that has accumulated between the most recent interest payment and the sale date of a bond. When a bond is sold in the secondary market, the amount of accrued interest that the current bondholder receives is added to the price of the bond to equal its total cost.

Advance refunding: sale of new bonds (a refunding issue) in advance, usually by some years, of the first call date of the old bonds (issue to be refunded). This would normally occur when the refunding issue has a lower interest rate than the issue to be refunded. The proceeds would typically be invested, usually in government securities, until the older, higher-rate bonds become callable.

All or None: an order type that will be executed only for the full quantity specified. Otherwise, it will not be executed at all.

Alternative Minimum Tax (AMT): an income tax levied to make certain that taxpayers with a large number of deductions, credits and exemptions do not escape all tax liabilities. For individuals subject to the AMT, interest from certain municipal bonds may be taxable.

AMBAC: AMBAC Indemnity Corp, a municipal bond insurance company.

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

Arbitrage: inefficiencies in the market can lead to arbitrage, which occurs when a security has price differences in different markets. Profiting on the price difference is known as arbitrage.

Ask or Asked price: the lowest price acceptable to a prospective seller of a bond. Together with the Bid, the two prices constitute a Quotation or Quote; the difference between the two prices is the Spread.

Assessed Valuation: dollar value assigned to property by a municipality for purposes of assessing taxes. The total of property values within municipality affects its tax base, which in turn could impact its ability to repay a debt and thus impact its rating.

Authority (Lease Revenue): a bond secured by the lease between a municipality or other authority and another agency. The lease payments from the municipality or other authority to the agency are equal to the debt service.

Authorizing Ordinance: a law that, when it is enacted, allows (i.e. authorizes) an issuer to sell a specific bond issue or finance a specific project.

Average Life: the average length of time that an issue of serial bonds and/or term bonds with mandatory sinking funds and/or estimated prepayments is expected to be outstanding. For example, average life is a factor used in mortgage-backed issues, because when interest rates go down, mortgages are often repaid early. Thus the length of time specified by the maturity date might be less relevant than the average life.

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Balloon Maturity: bond issue or long-term loan with larger dollar amounts of bonds or payments falling due in the later years of the obligation (i.e., a “balloon” at the end).

Bond Anticipation Note (BAN): short-term debt instrument issued by a state or municipality that will be paid from the proceeds of an upcoming bond issue.

Bank Qualified: municipal issuers who bring less than $10 million in debt per year. Bonds so designated are allowable assets for banks.

Basis Point: measure used in quoting yields on bonds and notes. One basis point is 0.01% of yield, or simply, 100 basis points in 1% of yield.

Bearer Bond or Bearer Security: a security that has no identification as to its owner. Lacking such identification, it is presumed to be owned by the bearer (the person who holds it).

Benchmark: in determining the Spread or yield spread, the benchmark is the security used as a base. U.S. Treasury securities are most frequently used as the benchmark.

Bid (Buy): the highest price a prospective buyer is prepared to pay at a particular time for a trading unit of a given security. Together with the Ask, the two prices constitute a Quotation or Quote; the difference between the two prices is the Spread.

Bond: any long-term interest bearing or discounted government or corporate security that obligates the issuer to pay the holder a specified sum of money, usually at specific intervals, and to repay the principal amount of the loan at maturity. A unit of debt, it is usually issued at $1,000 of principal or par amount.

A Bond: a unit of debt, usually $1,000 of principal or par amount.

Bond Buyer Municipal Bond Index: a municipal bond index published daily by The Bond Buyer which is made up of 40 long term high quality issues.

Bond Counsel or Bond Approving Attorney: a lawyer who writes an opinion on the bond or note regarding its tax-exempt status and the authenticity of its issuance.

Bond Funds: registered investment companies whose assets are invested in diversified portfolios of bonds. Investors should note that there are significant differences between buying individual bonds and buying bond funds

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. Bond insurance will usually impact the yield on a bond. Because an insured bond is considered more secure it may carry a lower rate.

Bond Ratings: credit quality evaluations of bonds and notes made by independent ratings agencies.

Bonded Debt: the portion of an issuer’s debt structure represented by outstanding bonds.

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.

Broker: a bond trader in the secondary market buying from and selling to bond dealers.

Broker/Dealer: a firm that brings buyers and sellers together in its function as broker and that also buys securities to sell while fulfilling its role as dealer.

Bullet Bond: bond that is non-callable for the life of the issue; redemption prior to maturity is prohibited.

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Callable Bond: a bond, which is redeemable by the issuer prior to the specified maturity date at a specified price (at or above par).

Call Premium: the amount over par that an issuer has to pay to an investor for redeeming the security early.

Call Protection: Provision in a bond indenture setting a certain period during which the bond cannot be called away by the issuer.

Capital Gain/Loss: The appreciation or depreciation of a security’s principal.

Certificate of Deposit (CD): debt instrument issued by a bank.

Client Order ID: optional order entry feature of order page that allows a subscriber to track specific orders by subscriber designation. Should a subscriber place an order on the platform without designating a Client Order ID, a Client Order ID will be generated.

Collateral Trust Bonds: Corporate bonds that are backed by a pledge of securities that the issuing corporation owns in another corporation. These are considered secured corporate bonds

Commercial Paper (CP): unsecured short term debt.

Competitive Sale: an auction sale of bonds conducted at a specific time in which the issuer takes bids for specific maturities and amounts and the issue is awarded to the highest bidder.

Compounding: computation of interest paid using the principal + previous accrued interest.

Conduit Bonds: bonds whose repayment is the responsibility of the business or developer who benefits from the financing. This might occur in an industrial development project.

Convertible Debentures: Corporate bonds that allow bondholders the right to convert their bonds into the common stock of the issuing corporation. They are also called convertible bonds. These are considered unsecured corporate bonds.

Coupon Rate (Coupon): rate of interest the issuer promises to pay to the bondholder until maturity, expressed as an annual percentage of face value.

Covenant: a legally binding commitment by the issuer of municipal bonds to the bondholder.

Credit Rating: Evaluation of the credit worthiness of a debt security by an independent rating service (see also ratings).

Credit Risk: financial and moral risk that an obligation will not be paid and a loss will result. Credit risk is evaluated by rating agencies and impacts the coupon rate of a bond.

Crossover Refunded: the revenue stream originally pledged to secure refunded securities that continues to be used to pay debt service on the refunded securities until they mature or are called. At that time, the pledged revenues pay debt service on the refunded securities.

Current Yield: annual interest on a bond divided by the market price. It is the actual income rate of return as opposed to the coupon rate (the two would be equal if the bond were bought at par) or the yield to maturity.

Cushion Bond: callable bond with a coupon above current market interest rates that are selling for a premium.

CUSIP: 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 municipal, U.S. Government, and corporate securities. Every bond issue has a unique CUSIP number. The first six digits of the nine digit CUSIP identify the issuer.

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Dated Date (or Issue Date): date from which accrued interest is calculated on new bonds and other debt instruments. The buyer pays the issuer an amount equal to the interest accrued from the dated date to the issue’s settlement date. The buyer is then reimbursed with the first interest payment on the bond.

Day Order: An order that will be cancelled at the end of the current day’s trading if it is not filled.

Dealer: a corporation or partnership that buys and sells and maintains an ongoing position in bonds and/or notes.

Debentures: Corporate bonds that are backed by the full faith and credit of the corporation, but not by any specific asset. These are considered unsecured corporate bonds.

Debt Limit: the maximum amount of debt that a general obligation bond issuer can either issue or have outstanding at any time.

Debt Service: cash required in a given period, usually one year, for payments of interest and current maturities of principal on outstanding debt.

Debt Service Reserve Fund: The funds in a bank trustee account established by the trust indenture and used as a backup security for an issuer’s bonds.

Default: failure of a debtor to make timely payments of interest and/or principal as they come due or to meet some other provision of a bond indenture. In the event of default, bondholders may make claims against the assets of the issuer in order to recoup their principal.

Delinquent Taxes: property taxes that have been levied but remain unpaid on and after the due date.

Delivery: refers to the completion of a bond transaction in the secondary market. For bonds bought or sold in the secondary market, delivery (and payment) must be in three business days

Denomination: face value or par amount of securities.

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. This factor is used by ratings agencies to determine the credit quality of the issuer and bond issue.

Disbursing Agent: the bank or trust company designated by the issuer to pay the interest and principal to the bondholder. Sometimes known as the Paying Agent or Fiscal Agent.

Discount: when a bond is selling below its face value, it is selling at a discount. See Discount Bond below. Discount also refers to the method of selling a zero coupon bond, which is redeemed at face value buts sells at a price significantly below face value to account for the interest payments that will accrue to it over time.

Discount Bond: bond selling below its face value.

Discount Rate: Interest rate charged by the Federal Reserve on loans to member banks.

Diversification: allocation of assets in an investment portfolio among different types of investments, in order to reduce the volatility of the portfolio.

Dollar Price: Estimated dollar price based upon a particular coupon and yield.

Double Barreled: municipal revenue bond whose principal and interest are also guaranteed by a larger municipal entity.

Double Exemption: securities that are exempt from state as well as federal income taxes are said to have double exemption. In most (but not all) states, if an individual buys a municipal bond issued by his home state, it will be tax exempt from both state and federal taxes.

Downgrade: a reduction in credit rating.

Duff & Phelps: since Fitch acquired Duff & Phelps, ratings by Duff & Phelps are included with

Duration: mathematical time measure that measures bond price volatility by measuring the length (maturity) of a bond.

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Equipment Trust Certificates: Corporate serial bonds that are backed by a pledge of specific equipment such as an airline securing the bond with an airplane. These are considered secured corporate bonds.

Escrowed to Maturity (ETM): bonds which are secured or defeased. This is usually accomplished by a trust holding U.S. Governments sufficient to meet debt service requirements.

Eurobonds: bonds sold in a country other than the one in whose currency the bond is denominated. These are also known as “foreign pay” issues.

Eurodollar Bonds: bonds that pay interest and principal in U.S. dollars and are issued outside the United States, primarily in Europe. These bonds are not registered in the U.S. and cannot trade in the U.S. for at least three months after issuance.

Escrow Fund: a fund that contains monies that can only be used to pay debt service.

Extraordinary Redemption: different from optional redemption or mandatory redemption in that it occurs under an unusual circumstance such as destruction of the facility financed.

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Face Value: value of the bond (or other security) as stated on the certificate or instrument. The actual market value may be higher or lower. Also referred to as principal or par value.

Feasibility Study: a financial study provided by the issuer of a revenue bond that estimates service needs, construction schedules, and future project revenues and expenses. This is used to determine the financial feasibility and creditworthiness of the project to be financed.

FGIC: Financial Guaranty Insurance Co. FGIC is a municipal bond insurer.

Financial Advisor: 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.

Final Official Statement (FOS): also known as Official Statement (OS). See Official Statement (OS).

First Coupon: Date when bond will pay its first coupon (payment to bond holder).

Fiscal Agent: The bank or trust company designated by the issuer to pay the interest and principal to the bondholder. Sometimes known as the paying agent or disbursing agent.

Fiscal Year: an accounting period covering 12 months at the end of which financial entities evaluate their financial position and respective revenues and expenditures and profit and loss is determined. In many cases the fiscal year will align with the calendar year.

Fitch: company which provides independent credit ratings of debt issuers. Since Fitch acquired Duff & Phelps, ratings by Duff & Phelps are included with Fitch.

Floating Rate Bond: a bond in which the interest rate is adjusted periodically according to a predetermined formula, based upon specific market indicators such as prevailing market interest rates.

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.

Full Faith and Credit: phrase meaning that the full taxing and borrowing power, plus revenue other than taxes, is pledged in payment of interest and repayment of principal of a bond issued by a government entity. In contrast, a revenue bond might rely only on payments from a particular project, such as a toll road, to repay its bond debt.

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General Obligation Bond (Municipal) (GO): municipal bond backed by the full faith and credit (which includes the taxing and further borrowing power) of a municipality. A GO bond is repaid with general revenue and borrowings, as opposed to a revenue bond , which is repaid with the revenue from a specific facility built with the borrowed funds, such as a toll road.

General Property Tax: a tax levied on real estate and personal property.

Good Till Cancelled (GTC): an order that will remain open until it is filled or cancelled, up to 90 calendar days.

Good Till Date (GTD): an order that remains open for specified date (up to 90 days) and time parameters (within regular business hours – currently 8:30 am to 5:00 pm ET). Min Qty: The specified minimum quantity of bonds available for a particular

Gross Debt: the total of an issuer’s debt obligations. Gross debt is an indicator used by ratings agencies to determine an issuer’s credit quality.
Gross Revenues : all annual receipts of a business entity or government prior to the payment of all expenses.

Guaranteed Bonds: Corporate bonds that are secured by a guarantee of another corporation to pay interest and principal if necessary. This is often seen when a parent company guarantees the bond issue of a subsidiary company.

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Income Bonds: Corporate bonds that are issued during reorganization (bankruptcy). The issuing corporation promises to repay the principal amount at maturity, but will pay interest if it has sufficient earnings. These speculative bonds are also known as adjustment bonds and are typically considered unsecured.

Indenture of Trust: formal agreement between an issuer of bonds and the bondholder describing in specific detail the terms and conditions of a bond offering, such as the bond’s maturity, coupon rate, call privileges, and other rights.

Industrial Development Bond (IDB): type of municipal revenue bond issued to finance fixed assets that are then leased to private firms, whose payments amortize the debt.

Interest: Cost of using money, expressed as a rate per period of time, usually one year, in which case it is called an annual rate of interest. Also known as the coupon rate.

Interest Rate Risk: risk associated with rising interest rates. See Market Risk.

Investment Banker: firm, acting as underwriter or agent, which serves as intermediary between an issuer of securities and the investing public.

Investment Grade: bond with a rating of AAA to BBB (according to S&P and Fitch) and Aaa to Baa (according the Moody’s).

Issuer: a legal entity that has the power to issue and distribute a security: e.g., the municipality that is issuing the bond.

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Junk Bond: bond with a credit rating of BB or Ba or lower by rating agencies.


Lease-Rental Bond: bonds whose principal and interest are payable exclusively from rental payments from a lessee.

Legal Opinion: an opinion on the validity of a securities issue with respect to its statutory authority, constitutionality, procedural conformity and usually the exemption of interest from federal income taxes.

Letter of Credit (LOC): bank credit guarantee.

Lien: creditor’s claim against property.

Limited Tax Bond: Municipal Bond backed by the full faith of the issuing government but not by its full taxing power. Instead, it is secured by the pledge of a special tax or group of taxes, or a limited portion of the real estate tax. Also see Full Faith and Credit.

Limit Order: an order that may be executed only at a specified price or better.

Liquidity: a subjective measure referring to the ease of trading a security. See Marketability.

Lowest Yield: The lowest yield on a security as determined after calculating the yield-to-maturity and the yield-to-call on the first call date and on all subsequent call dates up to maturity. Also called Yield-to-worst.

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Market Risk: risk associated with the market in general, for bonds this would be rising interest rates. See also Interest Rate Risk.

Marketability: speed and ease with which a particular security may be bought and sold.

Marks-Roos Bonds: financing of local government’s facilities by bond bank pools funded by bond proceeds.

Maturity: date when the principal amount of a security becomes due and payable. Maturity dates on bonds vary from 1 day to 30 years from the date of issue.

Maturity Size: Total par amount of bonds in a specific maturity.

Max Show: designation that allows an individual to define the displayed quantity while the balance (reserve) remains hidden. The displayed quantity is automatically replenished from the reserve. Orders greater than the displayed size will be matched against the entire reserve quantity. Only subscribers entering this type of order will be able to view their reserves.

MBIA: MBIA Insurance Corp., is a municipal bond insurer.

Minimum Quantity: the specified minimum quantity of bonds available for a particular order (purchase or sale).

Moody’s Investor Service: company which provides independent credit ratings of debt issuers.

Moral Obligation Bond: tax-exempt bond issued by a municipality, which is backed by the “moral obligation” pledge of a state government. The municipality states a moral responsibility to cover debt payments but is not officially required to do so.

Mortgage Corporate Bonds: Corporate bonds that are backed by a pledge of property and the bondholders have a lien of mortgage on the property. These are considered secured corporate bonds.

Mortgage Revenue Bond: bond backed by a lien on the monthly payments of a large pool of mortgages, usually issued by a state or local housing authority. Due to the nature of Mortgage Revenue Bonds, Average Life is often used in calculating value.

Municipal Bond: debt obligation of a state or local government entity. The funds may support general governmental needs or special projects.

Municipal Note: a short-term municipal debt obligation, generally with an original maturity of two years or less.

Municipal Securities Rulemaking Board (MSRB): an organization created under the Securities Acts Amendments of 1975 to regulate brokers, dealers and banks dealing in municipal securities.

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Negotiated Sale: a securities sale through an exclusive arrangement between the issuer and an underwriter or underwriting syndicate.

Net Asset Value (NAV): market value of the bonds in a mutual fund portfolio divided by all the outstanding shares, i.e. market value per share. The NAV is calculated and reported each day the market opens.

Net Bonded Debt: gross general obligation debt less self-supporting general obligation debt.

Net Interest Cost (NIC): the average coupon rate weighted to reflect the time until repayment of principal and adjusted for the premium or discount.

New Issues: fixed income securities being offered to the public for the first time.

New Issue Status:

Preliminary Notification: Prior to the retail order period the issuer makes available to retail and institutional customers as much information on a pending New Issue as available. No orders will be accepted at this time.

Retail Order Period: An order period designated exclusively for retail customers, created to give retail investors the opportunity to participate in the Municipal New Issue Market. Information available during the retail order period usually includes: issuer, rating, face amount, coupon, price, call structure and expected settlement date. During the retail order period,bonds are available for purchase only by retail customers.

Order Period: A general order period, allowing retail and institutional customers to place orders. Unlike during the retail order period no exclusivity or priority is given to retail orders.

Order Period Closed: No new orders will be accepted; at this time the order period is closed.

Non-callable Bond: a bond that cannot be called either for redemption by or at the option of the issuer before its specified maturity date. Whether or not a bond is callable will impact its value.

Note: written promise to pay a specified amount to a certain entity on demand or on a specified date. It has a shorter maturity than a bond.

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Offer (Ask, Sell): the lowest price acceptable to a prospective seller of a bond. Together with the Bid, the two prices constitute a Quotation or Quote; the difference between the two prices is the Spread.

Offering Price: price per share of a bond at which a new bond is sold. Also called the Public Offering Price.

Official Statement (OS): document prepared by or for the issuer that gives final details about a municipal bond issue and the issuer.

Open-End Fund: the standard bond fund. It has no fixed number of bonds in its portfolio, and buys or sells bonds as investors buy or redeem shares in the fund.

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.

Original Issue Discount (OID): a bond that qualifies for special treatment under federal tax law and is issued at a dollar price less than par (i.e., at a discount). If the bonds are held to maturity the difference between the issue price and par is treated as tax-exempt income rather than capital gain.

O.T.C. (Over the Counter): a security that is not listed and traded on an organized exchange.

Overlapping Debt: municipal accounting term referring to a municipality’s share of the debt of its political subdivisions or the special districts sharing its geographical area. Overlapping debt is a factor considered by rating agencies to evaluate the credit quality of a municipality.

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Par Value: the principal amount of a bond or note due at maturity. The actual market value may be higher or lower. Sometimes known as principal amount or face value.

Parity Bond: revenue bond that has an equal lien with other revenue bonds on the revenues of the issuer.

Paying Agent: agent, usually a bank, that receives funds from an issuer of bonds or stock and, in turn, pays principal and interest to bondholders and dividends to stockholders, typically charging a fee for the service. Sometimes called disbursing agent.

Preliminary Official Statement (POS): document prepared by or for the issuer that gives preliminary details about a municipal bond issue and the issuer.

Preliminary Prospectus: also known as red herring. This document is not as complete as the Prospectus, though most of the major facts of the offering are included.

Premium Bond: bond with a selling price above face or redemption value.

Pre-refunding: procedure used by issuers to refinance bonds to lower interest expenses. The issuer sells new bonds with a lower yield and uses the proceeds to safely invest, usually buying U.S. treasury securities, the interest from which is used to make payments on the bonds.

Price to Call: price of a bond using yield to the first call date rather than maturity as the redemption date. Price to Call is important when evaluating premium bonds.

Primary Market: the new issue market. Also called the original issue market. Bonds that are sold subsequent to the original issue are in the secondary market.

Prime Rate: interest rate a bank charges on loans to its most credit worthy customers.

Principal: face value of a bond that must be repaid at maturity, as separate from the interest. The actual market value may be higher or lower. Sometimes called Face Value or Par Value.

Principal, Acting As A: a broker acts as a principal when he buys a bond and holds it in inventory to resell, after marking up the price.

Prospectus: also known as a final prospectus or offering circular. When used for a public offering of securities, a prospectus is filed with the Securities and Exchange Commission and given to prospective buyers of the offering. The prospectus contains financial information and a description of a company’s business history, officers, operations, and use of proceeds from the issue of securities.

Put Bond: bond that allows its holder to redeem the issue at specified intervals before maturity and receive full face value.

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Qualified Legal Opinion: conditional affirmation of the legal basis for the bond or note issue.

Quantity: Designation that specifies the number of bonds an individual wishes to buy or sell. The face value (par) of a bond is typically $1,000, thus 10 bonds represents $10,000 face value.

Quotation: The bid price and the ask price for a particular bond.

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RAN: revenue anticipation note.

Rate Covenant: provision in municipal revenue bond agreements or resolutions covering the rates, or methods of establishing rates, to be charged users of the facility being financed.

Ratings: designations used by investors’ services to give relative indications of credit quality. The most common ratings agencies are Moody’s, Standard & Poor’s, and Fitch.

Redemption: process of refunding bonds or retiring existing bonds prior to maturity.

Redevelopment Agency (Tax Allocation): bonds secured by all of the property taxes on the increase in assessed valuation above the base on properties in the project.

Refunding Bond: the issuance of a new bond for the purpose of redeeming an outstanding bond issue. This generally happens when interest rates drop and an issuer wants to take advantage of the lower cost of capital.

Registered Bond: bond that is recorded in the name of the holder on the books of the issuer or the issuer’s registrar and can be transferred to another owner only when endorsed by the registered owner. This is in contrast to a Bearer Bond. Most bonds today are registered bonds.

Reoffering: the yield or price scale at which a new issue is offering for sale.

Repurchase Agreement (Repo): financial transaction in which one party purchases securities for cash and simultaneously the other party agrees to buy them back at some future time according to specified terms.

Revenue Bond: bond issued to finance public works such as bridges or tunnels or sewer systems and supported directly by the revenues of the project being financed. In contrast, a General Obligation or GO bond is backed by the taxes of the issuing municipality.

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Secondary Market: exchanges and over-the-counter markets where securities are bought and sold subsequent to original issuance, which took place in the primary or new issues market.

Secured Corporate Bonds: Corporate bonds that are backed by a specific pledged asset.

Security: instrument that signifies an ownership position in a corporation (a stock), a creditor relationship with a corporation or governmental body (a bond), or rights to ownership such as those represented by an option, right and warrant.

Self-Supporting Bonds: bonds sold for a project that will produce enough revenue to pay the debt.

Serial Bond: bond issue, usually of a municipality, with various maturity dates scheduled at regular intervals until the entire issue is retired. >

Settlement Date: the date on which a trade is settled. Regular settlement is 3 business days after the Trade Date for corporate and municipal bonds, and one business day for treasuries.

Short Term: investment with a maturity of one year or less.

Sinking Fund: money accumulated on a regular basis in a separate custodial account that is used to redeem debt securities or preferred stock issues. The term is also used to refer to the mandatory redemption of term or bullet (non-callable) maturities prior to maturity, the schedule of which is stated at the initial offering.

Special Tax Bond: municipal revenue bond that will be repaid through excise taxes on such purchases as gasoline, tobacco, and liquor. The bond is not backed by the ordinary taxing power of the municipality issuing it.

Spread: also known as yield spread. It is the difference in Yield between various issues of securities. It usually refers to issues of different credit quality since issues of the same Maturity and quality would normally have the same yields.

Standard and Poor’s:company which provides independent credit ratings of debt issuers.

Street Name: phrase describing securities held in the name of a broker or another nominee instead of the owner of the bond.

STRIPS: abbreviation for Separate Trading of Registered Interest and Principal of Securities. These are Treasury bonds with the coupons stripped, creating a zero coupon security.

Super Sinker Bond: bond with long-term coupons but with a short call.

Survivor’s Option: allows the owner’s estate to redeem the notes at par in the event of the owner’s death (certain limitations apply, refer to the offering prospectus for details).

Swap: the sale of a block of bonds and the purchase of another block of similar market value.

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TAN (Tax Anticipation Note): short term debt instrument issued by a municipality that will be paid from tax receipts.

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. The formula is: the tax-free yield divided by the difference of 100 minus the current tax federal and state rate.

For example, if your tax rate is 30% and a tax-free bond yields 6%, its Taxable Equivalent Yield is 8.57% (6%/1-30% = 6%/70% = 8.57%)

Taxable Municipal Bond: municipal bond issue where interest is not exempt from federal taxation.

Tax Allocation Bond: bond issued in conjunction with a redevelopment project. The taxes pledged to its repayment come from the increase of the 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 municipality or community that is legally available for taxation. This is one of the factors used by the ratings agencies to determine credit quality of the issuer.

Tax-exempt bond: bond whose interest is exempt from taxation by federal, state and/or local authorities.

Technical Default: failure by the issuer to meet the requirements of a bond covenant.

Tender: the act of offering bonds to a sinking fund.

Term Bond: a large block of bonds of long maturity.

Territorial Bonds: issued by U.S. territories, such as Puerto Rico, the Virgin Islands, etc. Interest on this debt is exempt from state and federal income taxes by congressional decree.

Thin Market: the scarcity of secondary market supply or few bid or offer quotes for a particular security.

TIGRs: abbreviation for Treasury Income Growth Receipts. These are Treasury bonds with the coupons stripped, creating a zero coupon security.

Time in Force: Period of time from initial order entry until designated order expiration. Examples include Day, Good Till Cancelled (GTC) and Good Till Date (GTD) orders.

Tombstone: advertisement placed in newspapers by investment bankers in a public offering of securities.

Trade Date: the day that a trade takes place. The settlement date usually follows the trade date by three business days (sometimes called T+3), but varies depending on the transaction and method of delivery used.

Trading Position: the holding of bonds in inventory by the dealer for purposes of buying or selling.

TRAN (Tax Revenue Anticipation Note): short term debt instrument issued by a municipality that will be paid from tax or other government receipts.

Treasuries: debt securities issued by the U. S. Treasury and backed by the “full faith and credit” of the U. S. government. These are the most creditworthy of all debt instruments because of the pledge to repay these debts and if necessary, the ability of the U.S. government to print money to make payments. They include: Treasury bonds, T-bills, T-notes and saving bonds.

Trustee: a bank designated by the issuer as the custodian of funds and official representative of bondholders. Trustees are appointed to insure compliance with the contract and represent bondholders to enforce their contract with the issuers.

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Underlying Debt: the debt of government entities within the jurisdiction of larger government entities and for which the larger entity has partial credit responsibility.

Underwrite: the assumption of the risk of buying a new issue of securities from the issuing corporation or government entity and reselling them to the public, either directly or through dealers.

Unit Investment Trust (municipal): a fixed portfolio of tax-exempt bonds sold in fractional, undivided interests. Investors receive a share of interest payments and a share of the principal, as the securities in the portfolio mature or are called.

Unlimited Tax Bond: municipal bond secured by the pledge to levy taxes at an unlimited rate until the bond is repaid.

Unsecured Corporate Bonds: Corporate bonds that are not backed by a specific pledged asset.

Upgrade: an improved rating by a ratings service.

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Variable Rate Bond: a bond whose yield is not fixed but is adjusted periodically according to a prescribed formula.

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When as and if issued: new issue bonds are offered on this basis until they are legally issued. In the rare case that bonds are not issued, all trades are cancelled

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Yankee Bonds: Bonds that are issued by foreign corporations and governments that trade in the U.S. and denominated in U.S. dollars.

Yield: a measure of the income generated by a bond, determined based on the price and the coupon of the bond. Current Yield is a simple calculation – the annual interest payment divided by the current price of the bond. Yield to Maturity or Yield to Call is a better indicator and allows investors to compare bonds of different maturities or price.

Yield Curve: a graph which shows interest rates at different maturities, ranging from short to long term. Typically upward sloping (that is, interest rates rise as maturities increase), a yield curve is occasionally downward sloping (or “inverted”).

Yield-to-call (YTC): yield on a bond assuming the bond will be redeemed by the issuer at the first call date.

Yield-to-maturity (YTM): concept used to determine the rate of return an investor will receive if a long-term, interest-bearing investment, such as a bond, is held to its maturity date.

Yield-to-worst (YTW): The lowest yield on a security as determined after calculating the yield-to-maturity and the yield-to-call on the first call date and on all subsequent call dates up to maturity. Also called Lowest yield.

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Zero Coupon Bond: a bond where no periodic interest payments are made. The investor receives a single payment at maturity. Zeros are issued at a discount from par or face value.

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