A security is considered “defeased” when all of the payments on the security have been made and the security is no longer outstanding. This typically happens when the security matures and is paid off in full. What are defeasance costs? Defeasance costs are the costs associated with prepaying a bond. In order to prepay a … Read more
The term “Ba1/BB+” is a rating assigned to a fixed income security by Moody’s Investors Service. The “Ba1” rating indicates that the security is judged to be of high credit quality, but is subject to moderate credit risk. The “BB+” rating indicates that the security is judged to be of good credit quality, but is … Read more
“Operation Twist” is a term used to describe a monetary policy maneuver undertaken by the U.S. Federal Reserve in the 1960s. The objective of the policy was to lower long-term interest rates and thereby stimulate economic activity. The policy was named “Operation Twist” because it involved the Fed selling short-term Treasury securities and using the … Read more
Debenture Meaning and Types. When it comes to debentures, there are a few different types that you should be aware of. Each type has its own set of features and benefits that make it unique. Here is a quick rundown of the different types of debentures: 1. Convertible debentures – These debentures can be converted … Read more
Credit exposure is the amount of risk that a lender is exposed to when lending money to a borrower. It is typically measured by the amount of money that the lender could lose if the borrower were to default on their loan. When a lender is considering lending money to a borrower, they will typically … Read more
A global bond is a debt security that is issued by a borrower in a foreign currency and is then typically sold to investors in that same currency. Global bonds are often issued by sovereign governments or supranational organizations, such as the World Bank. The main advantage of investing in global bonds is that they … Read more
A collateral trust bond is a type of debt security that is backed by a pool of assets, which are held in trust by a third party. The assets in the trust are used as collateral for the bond, and the trustee is responsible for managing the trust and ensuring that the assets are used … Read more
Refunding is the process of issuing new bonds to replace existing bonds that are about to mature. The purpose of refunding is usually to take advantage of lower interest rates, but it can also be done to extend the maturity of the debt, change the terms of the debt, or raise additional funds. When a … Read more
A Green Bond is a type of debt instrument that is specifically used to finance environmental and climate-related projects. Green Bonds can be issued by both public and private entities, and the proceeds can be used to fund a wide variety of projects, including solar and wind energy, energy efficiency, pollution prevention, and environmental protection. … Read more
The risk-free rate of return is the theoretical rate of return of an investment with zero risk. The risk-free rate is often used as a discount rate in financial calculations and is important in the pricing of assets. The risk-free rate is typically the interest rate on a short-term government bond, such as a three-month … Read more
