Fixed Income Definitions

Yield Burning

Yield burning is a method of financing municipal bonds which involves an underwriter placing large markups on US Treasury bonds used to compensate investors while waiting for repayment of old bonds after issuance of the new bonds. As bond prices and yields move inversely, marking up the price causes

Yield Advantage

The advantage in the rate of return of purchasing convertible securities over common stock.

Yen Bond

A bond denominated in Japanese Yen.

Yankee Bonds

Foreign bonds denominated in U.S. dollars and issued in the United States by foreign banks, companies or government entities.

Open Market Rate

The interest rate for Treasury bills, bonds and notes, set by traders as opposed to being set by the Federal Reserve Board.

Wild Card Option

Refers to a provision of any physical delivery Treasury Bond or Treasury Notes futures contract that permits shorts to wait until as late as 8:00 PM on any notice day to announce their intention to deliver at invoice prices that are fixed at 2:00 PM, the

Notional Principal

In an interest rate swap, forward rate agreement, or other derivative instrument, the amount or, in a currency swap, each of the amounts to which interest rates are applied in order to calculate periodic payment obligations. Also called the notional amount, the co

CD

See Certificate of Deposit.

Treasury Securities

Treasury securities—including Treasury bills, notes, and bonds—are debt obligations issued by the U.S. Department of the Treasury. Treasury securities are considered one of the safest investments because they are backed by the full faith and credit of

Treasury Notes

Same as Treasury Bonds except that Treasury Notes are medium-term (more than one year but not more than ten years).