Bond Dictionary

Bond Glossary

A comprehensive dictionary of 89+ bond terms and concepts for Indian investors

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Disclaimer: This glossary is for educational purposes only and does not constitute investment advice. Bond investments are subject to market risks. Please consult a SEBI-registered investment advisor before making investment decisions.

Bond Dictionary

Bond Glossary

A comprehensive dictionary of 89+ bond terms and concepts for Indian investors

Showing 89 terms

Ready to Learn More?

Understanding these terms is just the beginning. Explore our comprehensive learning modules to master bond investing.

Start Learning Try Calculators

Bond Glossary

54EC BondCapital gains bonds that provide tax exemption on long-term capital gains from property sale if invested within 6 months. Lock-in period is 5 years.Bond Types

54EC Bond

Accrued InterestThe interest that has accumulated on a bond since the last coupon payment. When you buy a bond between coupon dates, you pay the seller the accrued interest.Pricing & Yields

Accrued Interest

Amortizing BondA bond that repays both principal and interest over its life, rather than paying principal only at maturity. Common in mortgage-backed securities.Bond Types

Amortizing Bond

AT1 BondAdditional Tier 1 bonds issued by banks to meet regulatory capital requirements. These are perpetual, subordinated, and can be written down if the bank faces distress.Bond Types

AT1 Bond

AuctionThe process by which the government sells new G-Secs. RBI conducts both competitive auctions (for large investors) and non-competitive auctions (for retail investors).Trading & Settlement

Auction

Barbell StrategyA bond portfolio strategy that invests in short-term and long-term bonds, avoiding intermediate maturities.Analysis & Strategy

Barbell Strategy

Basis Point (bps)One hundredth of a percentage point (0.01%). Used to express small changes in yields or spreads. 100 bps = 1%.Pricing & Yields

Basis Point (bps)

Benchmark BondA highly liquid government bond used as a reference for pricing other bonds. In India, the 10-year G-Sec is the key benchmark.Trading & Settlement

Benchmark Bond

Bid-Ask SpreadThe difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask). Narrow spreads indicate high liquidity.Trading & Settlement

Bid-Ask Spread

BondA debt instrument where an investor lends money to an entity (government or corporation) for a defined period at a fixed or variable interest rate. The issuer promises to pay back the principal at maturity along with periodic interest payments.Bond Basics

Bond

Bullet BondA bond that pays only interest during its life and repays the entire principal at maturity. Most corporate bonds and G-Secs are bullet bonds.Bond Types

Bullet Bond

Call RiskThe risk that a callable bond will be redeemed early when interest rates fall, forcing the investor to reinvest at lower rates.Risk & Credit

Call Risk

Callable BondA bond that can be redeemed by the issuer before maturity at a predetermined price. Call options benefit issuers when interest rates fall.Bond Types

Callable Bond

CCILClearing Corporation of India Limited. The central counterparty for clearing and settlement of transactions in G-Secs, forex, and money market.Trading & Settlement

CCIL

Clean PriceThe price of a bond excluding accrued interest. This is the quoted price you see on trading platforms.Pricing & Yields

Clean Price

ConvexityA measure of how duration changes as yields change. Bonds with higher convexity benefit more from falling rates and lose less from rising rates.Analysis & Strategy

Convexity

Corporate BondDebt securities issued by companies to raise capital. Corporate bonds offer higher yields than government bonds but carry credit risk.Bond Types

Corporate Bond

CouponThe periodic interest payment made to bondholders, usually expressed as an annual percentage of the face value. Most Indian bonds pay semi-annual coupons.Bond Basics

Coupon

Coupon RateThe annual interest rate stated on a bond when it's issued, expressed as a percentage of the face value. This rate remains fixed for the life of the bond.Bond Basics

Coupon Rate

CovenantPromises or restrictions in the bond indenture that protect bondholders. Examples include maintaining certain financial ratios or limiting additional debt.Risk & Credit

Covenant

Credit RatingAn assessment of creditworthiness by agencies like CRISIL, ICRA, CARE, or India Ratings. Ratings range from AAA (highest quality) to D (default).Risk & Credit

Credit Rating

Credit RiskThe risk that a bond issuer may fail to make timely interest or principal payments. Also called default risk. Credit ratings help assess this risk.Risk & Credit

Credit Risk

Credit SpreadThe difference in yield between a corporate bond and a comparable government bond, representing the extra return for taking credit risk.Analysis & Strategy

Credit Spread

Current YieldThe annual coupon payment divided by the current market price. Unlike YTM, it doesn't account for capital gains/losses at maturity.Pricing & Yields

Current Yield

Cutoff YieldThe highest yield accepted in a government bond auction. All successful bidders in non-competitive bidding get bonds at this yield.Trading & Settlement

Cutoff Yield

Day Count ConventionThe method used to calculate accrued interest and yield. Common conventions include 30/360 for corporate bonds and Actual/Actual for G-Secs.Pricing & Yields

Day Count Convention

DebentureA debt instrument issued by companies, not backed by collateral. In India, the term is often used interchangeably with corporate bonds.Bond Types

Debenture

DefaultFailure by a bond issuer to make scheduled interest or principal payments. A default can be technical (temporary) or actual (permanent).Risk & Credit

Default

Demat AccountAn electronic account that holds securities in dematerialized form. Required for trading bonds on exchanges like NSE and BSE.Trading & Settlement

Demat Account

DepositoryAn organization that holds securities in electronic form. In India, NSDL and CDSL are the two depositories.Trading & Settlement

Depository

Dirty PriceThe total price of a bond including accrued interest. This is the actual amount you pay when buying a bond.Pricing & Yields

Dirty Price

Discount BondA bond trading below its face value, typically because its coupon rate is lower than prevailing market interest rates.Pricing & Yields

Discount Bond

DurationA measure of a bond's price sensitivity to interest rate changes. Higher duration means greater price volatility when rates change.Analysis & Strategy

Duration

DV01Dollar Value of 01 (or Price Value of a Basis Point). The change in bond price for a 1 basis point change in yield. Used to measure interest rate risk.Analysis & Strategy

DV01

Face ValueThe nominal value of a bond, also called par value, which is the amount paid to the bondholder at maturity. In India, most bonds have a face value of ₹100 or ₹1,000.Bond Basics

Face Value

Fixed IncomeA class of investments that provide regular, predictable income through fixed interest payments. Bonds are the most common fixed income instruments.Bond Basics

Fixed Income

Floating Rate BondA bond whose interest rate varies over time, typically linked to a benchmark rate like MIBOR or repo rate.Bond Types

Floating Rate Bond

Government Securities (G-Secs)Bonds issued by the central government of India, considered the safest investment as they carry sovereign guarantee. G-Secs have maturities ranging from 5 to 40 years.Bond Types

Government Securities (G-Secs)

Green BondBonds where proceeds are used exclusively for environmental projects like renewable energy, clean water, or sustainable infrastructure.Bond Types

Green Bond

High Yield BondBonds rated below investment grade (below BBB-) that offer higher yields to compensate for higher credit risk. Also called junk bonds or speculative grade bonds.Risk & Credit