Lingo topic · 51 terms
Bonds and money markets
Lending money for a price: yields, coupons and T-bills.
B
- Bond AuctionThe sale where a government sells new bonds to investors, who bid for them and set the interest rate it pays.
- Bond VigilantesBond investors who punish governments they see as reckless by selling their bonds and driving borrowing costs up.
- Bond YieldThe return a bond pays you each year as a percentage of its price. When bond prices fall, yields rise, and vice versa.
- BondsLoans to a government or company that pay regular interest and return the original amount on a set date.
C
- Credit RatingA grade, such as AAA or BB, showing how likely a government or company is to repay its debts.
- Credit Rating AgencyA firm that grades how creditworthy governments, companies and bonds are. The big three are S&P, Moody's and Fitch.
- Credit RiskThe risk that a borrower or trading partner fails to pay what it owes.
D
E
- EuriborA benchmark interest rate showing what eurozone banks pay to borrow unsecured euros from each other for set periods.
- EurobondsBonds issued in a currency other than that of the country where they are sold; also used for proposed jointly backed eurozone debt.
- EurodollarsUS dollar deposits held in banks outside the United States.
F
H
I
- ICE U.S. Dollar Inflation Expectations IndexAn index from Intercontinental Exchange designed to track what financial markets expect US inflation to be.
- Interbank RatesThe prices at which banks trade currencies or lend money to each other, usually better than what retail customers get.
- Interest rateThe cost of borrowing money, or the reward for lending it, shown as a yearly percentage. Central bank rates move currencies.
- Interest Rate RiskThe risk that changes in interest rates reduce the value of an investment, especially bonds.
- Inverted Yield CurveWhen short-term government bonds pay higher yields than long-term ones, often seen as a warning of recession.
L
M
- MaturityThe date a bond, loan or contract ends and the borrower must hand back the money.
- Money marketThe market for very short-term borrowing and lending, such as treasury bills, usually for a year or less.
- Mortgage-Backed SecuritiesBonds built from bundles of home loans, paying investors from the monthly payments of homeowners.
- MOVE IndexA gauge of how wildly traders expect US Treasury yields to swing, often called the "VIX of bonds".
O
- Open Market OperationsA central bank buying or selling government bonds in the market to steer short-term interest rates and liquidity.
- Overnight Reverse Repurchase Agreement FacilityA Fed facility where money market funds and others can park cash overnight and earn interest, setting a floor under short-term rates.
P
Q
R
- RepoA short-term loan where one party sells bonds and agrees to buy them back shortly after at a slightly higher price.
- Reserve Demand ElasticityHow sensitive short-term interest rates are to changes in the amount of reserves banks hold, a gauge of whether reserves are getting scarce.
- Reverse RepoThe lender's side of a repo: you hand over cash, take bonds as collateral, and sell them back later at a slightly higher price.
S
- Scarce Reserves RegimeA setup where banks hold only just enough reserves, so small changes in supply push short-term rates around.
- Secured Overnight Financing RateThe main US benchmark for overnight borrowing costs, based on real repo trades backed by Treasuries. It replaced LIBOR.
- Securities Financing TransactionsDeals where securities are used to borrow cash, or cash is used to borrow securities, such as repos and securities lending.
- SecuritizationBundling loans or other income-producing assets together and turning them into bonds that can be sold to investors.
- Shadow BankingLending and credit activities carried out by institutions that aren't regulated as banks, such as funds and finance companies.
- Sovereign DebtMoney a national government owes, usually in the form of bonds sold to investors.
- Standard & Poor'sA major US financial company known for its credit ratings and for its stock indices, including the S&P 500.
- Standing Repurchase Agreement FacilityA permanent Fed backstop where eligible firms can borrow cash overnight against Treasuries, to stop repo rates from spiking.
T
- Term SpreadThe gap between long-term and short-term interest rates, such as 10-year minus 2-year Treasury yields.
- TIBORA benchmark for the interest rate at which banks in Tokyo lend to each other.
- Treasury BillsShort-term US government debt that matures in a year or less and is sold at a discount instead of paying interest.
- Treasury BondsLong-term US government debt, issued for 20 or 30 years, paying interest every six months.
- Treasury General AccountThe US government's main bank account, held at the Federal Reserve.
- Treasury NotesUS government debt maturing in 2 to 10 years, including the 10-year note, the world's most watched interest rate.
U
X
Y
Z
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