Ascending, or Positive, Yield Curve: The interest rate structure which exists when long-term interest rates exceed short-term interest rates.

Bond: The written evidence of debt, bearing a stated rate or stated rates of interest, or stating a formula for determining that rate, and maturing on a date certain, on which date and upon presentation a fi xed sum of money plus interest (usually represented by interest coupons attached to the bond) is payable to the holder or owner. For purposes of computations tied in to “per bond,” a $1,000 increment of an issue (no matter what the actual denominations are) is used. Bonds are long-term securities with a maturity of greater than one year.

Bond Swap: The sale of a bond and the purchase of another bond of similar market value. Swaps may be made to establish a tax loss, upgrade credit quality, extend or shorten maturity, etc.

Bullet: A security with a fi xed maturity and no call feature.

Call: Actions taken to pay the principal amount prior to the stated maturity date, in accordance with the provisions for “call” stated in the proceedings and the securities. Another term for call provisions is redemption provisions.

Callable: Subject to payment of the principal amount (and accrued interest) prior to the stated maturity date, with or without payment of a call premium. Bonds can be callable under a number of different circumstances, including at the option of the issuer, or on a mandatory or extraordinary basis.

Call Date: The date at which some bonds are redeemable by the issuer prior to the maturity date.

Coupon: The rate of interest payable annually.

Current Yield: The ratio of interest to the actual market price of the bond, stated as a percentage. For example, a bond with a current market price of $1,000 that pays $60 per year in interest would have a current yield of 6%.

Duration: The most commonly used measure of risk in bond investing. Duration takes a bond's coupon, yield, maturity and special features into one number to indicate how price-sensitive a bond or a portfolio is to changes in interest rates.

Federal Funds Rate: The interest rate charged by banks on overnight loans of their excess reserve funds to other banks.

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

High-Yield Bond: Bonds issued by lower-rated corporations, sovereign countries and other entities rated Ba or BB or below and offering a higher yield than more creditworthy securities; sometimes known as junk bonds.

Inverted, or Negative, Yield Curve: The interest rate structure which exists when short-term interest rates exceed long-term interest rates.See “ascending, or positive, yield curve."

Investment Grade: Bonds considered suitable for preservation of invested capital; ordinarily, those rated Baa3 or better by Moody’s Investors Service, or BBB- or better by Standard & Poor’s Corporation.

Liquidity: The ability to trade bonds effi ciently without causing any major changes in their prices.

Maturity Date: The date when the principal amount of a security becomes due and payable, if not subject to prior call or redemption.

Premium: The amount by which the price of a security exceeds its principal amount.

Spread to Treasury: The difference between the yield on a fi xed-income security and the yield on a Treasury security of comparable maturity. For example, the spread between a 10-year Treasury yielding 4.75% and a 10-year corporate yielding 5.25% is 50 basis points.

Yield: The annual percentage rate of return earned on a security. Yield is a function of a security’s purchase price and coupon interest rate.