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Interest deemed to be earned on a security but not yet paid to the investor.
Price being sought for the security by the seller.
One one-hundredth of 1 percent. Yield differences among fixed-income securities are stated in basis points.
Bid
The price at which a buyer offers to buy a security.
Book-entry
A method of recording and transferring ownership of securities electronically, eliminating the need for physical certificates.
Callable bonds
Bonds which are redeemable by the issuer prior to the maturity date at a specified price at or above par.
Call premium
A Naira amount, usually stated as a percent of the principal amount called, paid by the issuer as a “penalty” for the exercise of a call provision.
Cap
The top interest rate that can be paid on a floating-rate security.
Coupon
This part of a bearer bond denotes the amount of interest due, and on what date and where payment will be made.
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 $80 per year in interest would have a current yield of 8%.
Default
Failure to pay principal or interest when due. Defaults can also occur for failure to meet non-payment obligations, such as reporting requirements, or when a material problem occurs for the issuer, such as bankruptcy.
Discount
The amount by which the purchase price of a security is less than the principal amount, or par value.
Embedded option
A provision within a bond giving either the issuer or the bondholder an option to take some action against the other party. The most common embedded option is a call option, giving the issuer the right to call, or retire, the debt before the scheduled maturity date.
Face amount
Par value (principal maturity value) of a security appearing on the face on the instrument.
Floating-rate bond
A bond for which for which the interest rate is adjusted periodically according to a pre-determined formula, usually linked to an index.
Interest
Compensation paid or to be paid for the use of money. Interest is generally expressed as a percentage rate.
Issuer
An entity which issues and is obligated to pay principal and interest on a debt security.
Liquidity or Marketability
A measure of the relative ease and speed with which a security can be purchased or sold in the secondary market at a price that is reasonably related to its actual market value.
Maturity
The date when the principal amount of a security is payable.
Non-callable bond
A bond that cannot be called for redemption by the issuer before its specified maturity date.
Offer
The price at which a seller will sell a security.
Offering price
The price at which members of an underwriting syndicate for a new issue will offer securities to investors.
Par value
The principal amount of a bond or note due at maturity.
Paying agent
Place where principal and interest are payable – the CBN performs this function for the DMO.
Premium
The amount by which the price of a security exceeds its principal amount.
Primary market
The market for new issues.
Principal
The face amount of a bond, payable at maturity.
Reinvestment risk
The risk that interest income or principal repayments will have to be reinvested at lower rates in a declining rate environment.
Secondary market
Market for issues previously offered or sold.
Settlement date
The date for the delivery of securities and the payment of funds.
Swap
Simply, the sale of a block of bonds and the purchase of a similar market value. Swaps may be made to achieve many goals, including establishing a tax loss, upgrading credit quality, extending or shortening maturity, e.t.c.
Trade date
The date when the purchase or sale of a bond is transacted.
Transfer agent
A party appointed by an issuer to maintain records of securities owners, to cancel and issue certificates, and to address issues arising from lost, destroyed or stolen certificates.
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.
Yield curve
A line tracing relative yields on a type of security over a spectrum of maturities ranging from three months to thirty years.
Yield to call
A yield on a security calculated by assuming that interest payments will be paid until the call date, when the security will be redeemed at the call price.
Yield to maturity
A yield based on the assumption that the security will remain outstanding to maturity. It represents the total of coupon payments until maturity, plus interest on interest, and whatever gain or loss is realized from the security at maturity.
Zero-coupon bond
A bond on which no periodic interest payments are made. The investor receives one payment – which includes principal and interest – at redemption (call or maturity).
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