U.S. bond glossary
Concise definitions for reading offering documents, brokerage quotations and Bond Atlas guides. Examples refer to conventional structures unless noted.
Accrued interest
Interest that has accumulated since the previous coupon date but has not yet been paid. A secondary-market bond buyer commonly pays the clean price plus accrued interest.
Bid-ask spread
The difference between the price at which a dealer is prepared to buy a security and the price at which it is prepared to sell. It is a potential transaction-cost component.
Bond
A debt security representing an issuer's obligation to make specified interest and principal payments. Terms and risks vary by issuer and instrument.
Call provision
A term allowing the issuer to redeem a bond before maturity under specified dates and prices. It can limit price appreciation and create reinvestment risk.
Clean price
A bond quotation excluding accrued interest. The invoice amount generally adds accrued interest to arrive at the dirty price.
Coupon
The interest rate applied to a bond's face value, or the resulting payment. A fixed coupon does not change when the market price changes.
Credit rating
A rating agency's opinion about relative creditworthiness. It is not a guarantee, insurance policy or recommendation.
Credit spread
The yield difference between a bond and a specified benchmark, often a similar-maturity Treasury. It can reflect credit, liquidity and structural risks.
CUSIP
A nine-character identifier used for many U.S. and Canadian securities. It helps distinguish a specific issue from other bonds sold by the same issuer.
Default
Failure to meet a debt obligation, such as missing required principal or interest, or violating another contract term that constitutes default.
Discount
A price below face value. A discount does not automatically represent better value or eliminate the risk of further losses.
Duration
A measure connected to the timing of cash flows and sensitivity to yield changes. Modified duration approximates percentage price sensitivity; effective duration can account for options.
ETF
An exchange-traded fund: a pooled investment vehicle whose shares trade on an exchange. It can hold bonds, stocks or other assets.
Face value (par)
The principal amount used to calculate coupon payments and normally repaid at maturity. It differs from the market price.
Floating Rate Note (FRN)
A security whose coupon resets using a reference rate plus a spread. U.S. Treasury FRNs have two-year terms and quarterly interest.
High-yield bond
A non-investment-grade or speculative-grade bond. Its higher yield generally compensates for greater credit and other risks.
I Bond
A non-marketable Series I U.S. savings bond whose composite rate combines a fixed component and an inflation component. Purchase and redemption restrictions apply.
Indenture
The legal contract governing a bond issue. It describes payment terms, covenants, events of default, trustee duties and bondholder rights.
Investment grade
A ratings category generally covering Baa/BBB and above on major agency scales. It indicates relatively lower expected default risk, not assured payment.
Liquidity
The ability to trade without a substantial price concession. An infrequently traded bond can have a wide bid-ask spread.
Market discount
A discount arising when a bond is purchased in the secondary market below the relevant adjusted amount. Special tax rules can treat later gain as ordinary income.
Maturity
The date on which principal is contractually due. Maturity is not the same as duration or the date on which an investor must sell.
Municipal bond
Debt issued by a state, local government or related entity. Interest may receive special tax treatment, but exemptions and credit quality vary.
Noncompetitive bid
A Treasury auction bid for an amount at the rate or yield determined by the auction. TreasuryDirect individual accounts use this bid type.
Original issue discount (OID)
The excess of a debt instrument's stated redemption price over its issue price when it exceeds the applicable threshold. OID can accrue as taxable interest before cash arrives.
Premium
A price above face value. Premium amortization can affect tax basis and annual reporting.
Principal
The amount borrowed and generally repaid under the bond's terms. TIPS principal adjusts with inflation or deflation.
Secondary market
Trading in securities after their original issuance. Buyers purchase from existing holders rather than directly from the original issuer.
Seniority
A claim's priority relative to other obligations. Senior, subordinated, secured and unsecured bonds can have different recovery outcomes.
TIPS
Treasury Inflation-Protected Securities. Their principal adjusts with CPI-U, and a fixed coupon is paid on the adjusted principal.
Treasury bill, note and bond
Marketable U.S. government securities distinguished by original maturity and payment structure. They are different from non-marketable savings bonds.
Yield curve
A snapshot of yields across maturities, often using Treasury benchmarks. Its shape reflects multiple economic and market forces.
Yield to maturity (YTM)
The annualized discount rate equating a bond's price with its promised payments under calculation assumptions. It is not a guaranteed realized return.
Yield to worst (YTW)
The lowest yield among specified maturity and call scenarios under the calculation convention. It is useful for bonds with issuer redemption options.
Zero-coupon bond
A bond that does not make periodic coupon payments. It is issued at a discount and pays a higher amount at maturity; OID tax rules can apply annually.
Put the terms in context
See how coupon, price, yield and duration interact in a worked example.
Read the bond price guide