About Government/Agency Bonds
U.S. Treasury Securities Glossary
- Accrued interest.
Interest deemed to be earned on a security but not yet paid to the investor.
- Ask price.
The price at which the sellers offers to sell a security.
- Ask yield.
The return an investor would receive on a Treasury security if he or she paid the ask price.
- Bid price.
The price at which a buyer is willing to purchase a security.
A method of recording and transferring ownership of securities electronically, eliminating the need for physical certificates.
- Callable bonds.
Bonds that are redeemable by the issuer prior to the maturity date, at a specified price at or above par. (The Treasury has not issued callable bonds since 1985.)
A feature of a bond that denotes the amount of interest due and the date payment will be made.
- Current yield.
The ratio of the interest rate payable on a bond to the actual market price of the bond, stated as a percentage. For example, a bond with a current market price of par ($1,000) that pays eighty dollars ($80) per year in interest would have a current yield of eight percent.
The amount by which the par value of a security exceeds its purchase price. For example, a $1,000 par amount bond which is currently valued at $980 woud be said to be trading at a two percent discount.
- Face (or Par value or Principal value).
The principal amount of a security that appears on the face of the instrument.
An investment made to minimize the impact of adverse movements in interest rates or securities prices.
The entity obligated to pay interest and principal on a bond it issues.
A technique for reducing the impact of interest-rate risk by structuring a portfolio with different bond issues that mature at different dates.
The date when the principal amount of a security is due to be repaid.
- Off-the-run Treasuries.
Those sold in the secondary market rather than "on-the-run" Treasury securities, which are those most recently issued by the Government.
- Secondary market.
Market for issues previously offered or sold.
The annual percentage rate of return earned on a bond calculated by dividing the coupon interest rate by its purchase price.
- Yield to maturity.
The yield on a bond calculated by dividing the value of all the interest payments that will be paid until the maturity date, plus interest on interest, by the principal amount recieved at the maturity date, taking into consideration whatever gain or loss is realized from the bond at the maturity date.
- Zero-coupon bond
A bond which does not make periodic interest payments; instead the investor receives one payment, which includes principal and interest at redemption (call or maturity).
All information and opinions contained in this publication were produced by the Securities Industry and Financial Markets Association from our membership and other sources believed by the Association to be accurate and reliable. By providing this general information, the Securities Industry and Financial Markets Association makes neither a recommendation as to the appropriateness of investing in fixed-income securities nor is it providing any specific investment advice for any particular investor. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and sources may be required to make informed investment decisions.