Glossary
Every fixed-income term you'll come across on this site, and in the wild, defined in plain English.
Accrued Interest
Interest earned but not yet paid, owed to the seller when a bond changes hands mid-period.
Allotment
The formal process of assigning bonds from a new issue to investors who applied, once the issue closes.
Amortizing Bond
A bond that repays part of its principal along with each interest payment, rather than the full face value at maturity.
ASBA
Applications Supported by Blocked Amount: a process where your application money is blocked, not debited, in your bank account until a public bond issue is allotted.
AT1 Bond
A perpetual, bank-issued bond that can be written down or converted to equity if the bank's capital falls below a regulatory threshold. It pays a higher yield for a higher, less typical kind of risk.
Basis Point
One-hundredth of a percentage point (0.01%), the standard unit for quoting yields, spreads and rate changes.
Beneficial Owner
The investor who owns the economic benefit of a security held in demat form. That's you, even though the depository is the registered holder.
Bond
A loan you make to an issuer, who pays you interest and returns your principal at maturity.
Bullet Repayment
Repayment of a bond's entire principal in a single payment at maturity, the most common structure for corporate bonds.
Buyback Facility
FixedFlow's standing offer to buy an eligible bond back before maturity at a stated discount to par. An assurance, not a guarantee.
Callable Bond
A bond the issuer can repay before maturity, at a price set in advance.
Capital Gain
The profit you make if you sell a bond for more than you paid for it, before it matures.
Capital Loss
The loss you incur if you sell a bond for less than you paid for it, before it matures.
CDSL
Central Depository Services Limited, India's other securities depository alongside NSDL.
Clean Price
A bond's price excluding accrued interest, and the figure usually quoted when comparing bonds.
Clearing Corporation
The entity, ICCL or NSECL in India, that guarantees and settles trades between buyers and sellers on an exchange, so neither side bears the other's counterparty risk.
Compounding
Earning a return on both your original investment and on the interest it has already accumulated.
Convertible Debenture
A debenture that can be converted into a fixed number of the issuer's equity shares, either compulsorily or at the holder's option.
Convexity
How much a bond's duration itself changes as interest rates move.
Coupon Payment
The actual interest amount paid to you on a scheduled date, calculated by applying the coupon rate to face value.
Coupon Rate
The fixed annual interest rate a bond pays, expressed as a percentage of face value.
Covenant
A binding condition in a bond's terms that restricts what the issuer can or must do, protecting bondholders beyond the credit rating alone.
Credit Rating
An agency's opinion on how likely an issuer is to repay its debt in full and on time.
Credit Risk
The risk that an issuer fails to pay interest or repay principal in full and on time, also called default risk.
Credit Spread
The extra yield a bond offers over a comparable risk-free benchmark, compensating investors for default and liquidity risk. Closely related to spread over G-Sec.
Cross Default
A covenant under which defaulting on one debt obligation automatically triggers default on this bond too, even if this bond's own payments are current.
Current Yield
A bond's annual coupon payment divided by its current market price. It is a quick but incomplete measure of return that ignores time to maturity.
Day Count Convention
The method used to count days between coupon dates for calculating accrued interest. Common conventions in India include Actual/Actual and 30/360.
Debenture
A type of bond, typically unsecured or secured only by a general charge, issued by a company. In India, "debenture" and "bond" are often used interchangeably.
Debenture Redemption Reserve (DRR)
A reserve some issuers must set aside out of profits to secure the repayment of debentures. Largely phased out for listed NCDs after 2019, but still relevant for certain issuers.
Debenture Trustee
A SEBI-registered entity appointed to safeguard bondholders' interests, monitor the issuer's covenants, and act on investors' behalf if something goes wrong.
Debt Instrument
Any security, including bonds, debentures and T-bills, that represents money borrowed and owed, as opposed to equity ownership.
Deep Discount Bond
A bond, often zero-coupon, sold well below its face value. The wide gap itself substitutes for periodic interest payments.
Demat Account
The electronic account where your bonds are held in your own name.
Depository
An institution, NSDL or CDSL in India, that holds securities electronically and settles trades, eliminating the need for physical certificates.
Depository Participant (DP)
The bank or broker through which you actually open and operate your demat account with a depository.
DICGC
The insurer that guarantees bank deposits up to ₹5,00,000 per depositor.
Dirty Price
A bond's price including accrued interest, and the actual amount you pay to settle a purchase.
Discount
When a bond trades below its face value, usually because its coupon is lower than current rates, or its credit risk has risen.
Discounting
The process of converting a future cash flow into its present value by applying a discount rate.
Duration
A measure of how sensitive a bond's price is to a change in interest rates.
Electronic Bidding Platform (EBP)
SEBI's mandated electronic platform on stock exchanges for placing and allotting privately placed debt securities above a threshold size, improving pricing transparency.
Event of Default
A defined trigger, such as a missed payment or covenant breach, that gives bondholders the right to demand immediate repayment.
Ex-Interest Date
The date on or after which a bond trades without the right to its next coupon payment. The buyer no longer receives that specific payout.
Face Value (Par Value)
The amount the issuer repays you at maturity, and the base the coupon is calculated on.
Fallen Angel
A bond downgraded from investment grade to below investment grade (junk). The downgrade itself often triggers forced selling by some funds.
Fixed Income
The broad asset class of investments that pay a predictable, scheduled return: bonds, T-bills and similar instruments, as opposed to stocks.
Floating Rate Bond
A bond whose coupon resets periodically against a benchmark rate, such as a T-bill yield or repo rate, rather than staying fixed.
Interest Payment Frequency
How often a bond pays out coupon interest: monthly, quarterly, semi-annually, annually, or as a single cumulative payout at maturity.
Interest Rate Risk
The risk that a bond's market price falls because interest rates rise after you buy it. Longer-duration bonds are more exposed.
Internal Rate of Return (IRR)
The discount rate at which the present value of all cash flows from an investment equals zero. For a bond, this is effectively its YTM.
Inverted Yield Curve
A yield curve where short-term yields exceed long-term yields, historically viewed as a signal of a slowing economy.
Investment Grade
A credit rating of BBB-/Baa3 or higher. Agencies judge these issuers to have a relatively low risk of default.
ISIN
The unique 12-character code that identifies a specific bond issuance.
Issue Price
The price at which a bond is first sold to investors, which can be at, above or below face value.
Issuer
The entity borrowing money by selling the bond: a company, bank or government.
Liquidity Risk
The risk that you can't sell a bond quickly, or at a fair price, before it matures. This is more common in India's corporate bond market than in equities.
Listed Bond
A bond admitted to trading on a stock exchange, which brings disclosure obligations and generally better secondary-market liquidity than an unlisted bond.
Macaulay Duration
The weighted-average time, in years, it takes to receive a bond's cash flows, and the basis from which modified duration is derived.
Market Price
What a bond currently trades for in the secondary market, which moves with interest rates, credit quality and demand.
Maturity Date
The date the issuer repays your face value in full and the bond ends.
Modified Duration
An estimate of how much a bond's price will move, in percentage terms, for a 1% change in interest rates.
Municipal Bond
A bond issued by an urban local body, such as a municipal corporation, usually to fund civic infrastructure projects.
NCD
Non-Convertible Debenture: a corporate bond that cannot be converted into equity.
Negative Pledge
A covenant preventing the issuer from pledging its assets to other lenders in a way that would leave existing bondholders less secured.
Nomination
Naming a person to inherit your bond holdings automatically in the event of your death, without requiring a court process.
NSDL
National Securities Depository Limited, one of India's two securities depositories, where most demat accounts and bond holdings are recorded.
Online Bond Platform Provider (OBPP)
An entity registered with SEBI under the Online Bond Platform Providers framework, permitted to let investors buy and sell listed debt securities online.
Over-the-Counter (OTC)
A trade negotiated directly between two parties rather than executed on a stock exchange's order book. Common for large corporate bond trades in India.
Payment Waterfall
The set order in which an issuer's available cash is applied if there isn't enough to pay everyone at once: senior claims, then interest, then principal, then junior claims.
Perpetual Bond
A bond with no fixed maturity date, paying interest indefinitely. In India, these are most commonly seen as bank AT1 bonds.
Premium
When a bond trades above its face value, usually because its coupon is higher than what similar new bonds now offer.
Present Value
Today's worth of a future cash flow, discounted back at an appropriate interest rate, and the foundation of how bonds are priced.
Primary Market
Where a bond is first sold by the issuer to investors, before it starts trading between investors in the secondary market.
Principal
The original amount you invest or lend. It is the base on which interest is calculated and which the issuer eventually repays.
Private Placement
A bond issued to a select group of institutional or high-net-worth investors rather than offered to the general public.
Public Issue
A bond offer open to the general investing public, requiring a detailed prospectus and regulatory approval.
Puttable Bond
A bond that gives the investor, not the issuer, the right to demand early repayment on specified dates.
Rating Outlook
An agency's view on the likely direction of an issuer's rating over the medium term: Positive, Stable or Negative.
Rating Watch
A signal that an agency is actively reviewing an issuer's rating for a possible near-term change, often after a specific triggering event.
RBI
Reserve Bank of India, the central bank that regulates government securities, banks, and India's overall monetary policy.
Real Yield
A bond's yield adjusted for inflation: the actual increase in your purchasing power, as opposed to the nominal (stated) yield.
Record Date
The cut-off date a company uses to determine exactly who is entitled to a coming interest payment or redemption.
Redemption
The repayment of a bond's face value to investors, whether at scheduled maturity or an earlier call or put date.
Registrar and Transfer Agent (RTA)
The entity that maintains the official record of who holds a bond, processes interest payouts and redemptions, and handles investor requests like address updates.
Reinvestment Risk
The risk that coupon payments or early-redemption proceeds have to be reinvested at a lower rate than the original bond offered.
Repo Rate
The rate at which the RBI lends short-term funds to banks against government securities, and a key lever that moves bond yields across the market.
Risk-Free Rate
The theoretical return on an investment with zero default risk, typically proxied in India by the government security (G-Sec) yield.
SDL
State Development Loan: a bond issued by an individual Indian state government.
SEBI
Securities and Exchange Board of India, the regulator overseeing India's securities markets, including bond issuance, trading platforms and investor protection.
Secondary Market
Where existing bonds trade between investors, after their original issuance.
Sinking Fund
A reserve an issuer sets aside over time to fund the eventual repayment of a bond, reducing the risk of a repayment shortfall.
Sovereign Gold Bond (SGB)
A government-issued bond denominated in grams of gold, paying a small fixed interest on top of a redemption value linked to the gold price.
Spread over G-Sec
How much extra yield a bond offers over a government security of similar tenure.
Stamp Duty
A small government levy charged on the transfer of debt securities, deducted automatically as part of settlement.
Step-Up / Step-Down Coupon
A bond whose coupon rate increases (step-up) or decreases (step-down) at pre-set dates over its life, rather than staying fixed.
TDS
Tax Deducted at Source: income tax withheld before certain interest payments reach you.
Tenure (Tenor)
The length of time remaining until a bond matures. A shorter tenor generally means lower interest-rate risk.
Treasury Bill (T-Bill)
A short-term (up to 364-day) government security issued at a discount to face value, with no periodic coupon. It is the safest, most liquid short-term instrument in India.
Unlisted Bond
A bond not traded on any stock exchange, typically less liquid and with fewer ongoing disclosure requirements than a listed bond.
UPI Mandate
A UPI-based authorization used in retail bond and IPO applications, letting funds stay in your account (blocked) until allotment, instead of being transferred upfront.
Yield
The annual return a bond generates, expressed as a percentage of what you paid.
Yield Curve
A chart plotting yields of similar-quality bonds against their maturities. Its shape signals what the market expects for growth and inflation.
Yield to Call (YTC)
The annualized return you'd earn if a callable bond is redeemed on its earliest call date rather than held to maturity.
Yield to Maturity (YTM)
The total annualized return if you hold a bond until it matures, including price and coupons.
Yield to Worst (YTW)
The lowest possible annualized return across every early-redemption scenario a bond allows, and the conservative number to underwrite to.