A bond that allows the holder to force the issuer to repurchase the security at specified dates before maturity. The repurchase price is set at the time of issue, and is usually par value. |||Bondholders have the option of putting bonds back to the issuer either once during the lifetime of the bond (known as a one-time put bond), or on a number of different dates. Of course, the special advantages of put bonds mean that some yield must be sacrificed. This type of bond is also known as a multimaturity bond, an option tender bond, a variable rate demand obligation (VRDO).
A transaction in which bonds with lower yields are swapped for bonds with higher yields. |||Pure yield pickup swaps are usually a risky investment strategy. Investors using this strategy expose themselves to higher interest rate risk since higher yielding bonds will have a longer term to maturity. In addition, high yielding bonds are usually of lower credit quality, thereby exposing the investor to higher default risk.
A type of security that pays no income until maturity; upon expiration, the holder receives the face value of the instrument. The instrument is originally sold for less than its face value (at a discount). |||Pure discount instruments can take the form of zero-coupon bonds or Treasury bills.An example of a pure discount instrument could be a bond with a face value of $100. Its time to maturity is two years and it is currently selling for $85. If the investor holds this bond to maturity, he or she will earn a yield of 8.47% ( (100/85)^(1/2) ).
The predecessor association to the Bond Market Association, which represents the largest securities markets in the world, the bond markets. The Public Securities Association was incorporated in 1976, and underwent a name change to the Bond Market Association in 1997 to better reflect its broadened constituency and membership. |||The Bond Market Association represents a diverse mix of securities firms and banks, from large firms to niche specialists, with 70% of member firms having their headquarters outside of New York City. Its members collectively account for a significant majority of U.S. municipal bond underwriting and trading.
An unsecured, unsubordinated debenture issued by a public company. PINES trade on a stock exchange but also bear interest. |||These types of securities are in that gray area between bonds and preferred stock.
A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. |||Ratings range from AAA or Aaa (the highest) to C or D, which represents a company that has already defaulted.
An agreement made between a debtor and a creditor to repay some or all of a debt. Reaffirmations are made on a purely voluntary basis by the debtor. The bankruptcy code stipulates that the debtor's attorney must file a statement with the court affirming that he or she can repay the debt without incurring further personal financial harm. |||Reaffirmations cannot legally require the debtor to repay the debt. Lenders have no real leverage from them, and can only rely on the good faith intent of the debtor to repay the debt. This type of arrangement is prohibited under Chapter 13 Wagearner plans.
A price at which the underwriting syndicate of a debt issue resells the bonds to public investors. The syndicate will purchase the bonds for a specified amount from the issuing firm and re-offer the bonds to the public, usually at a different price. |||An underwriting investment bank may facilitate a debt issue by agreeing to purchase all of the bonds for a price below face value. Having the underwriters purchase the bond issue, instead of passing the sale onto the public, removes the company's risk of not selling the entire issue. The investment banker will re-offer the bonds to public investors at a higher price, which may be above (premium) slightly below (discount) par value. In a serial issue, most common to municipal GO bonds, the first bonds to mature are frequently at a premium with a higher coupon rate. The last bonds to mature in the offering are sometimes sold at a discount, but carry a lower coupon rate.
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