Fixed Income Terms: Bonds & Yields

Interest earned since the last coupon date but not yet paid.

Example: A buyer compensates the seller for interest accrued between coupon dates.

Accrued Interest describes interest earned since the last coupon date but not yet paid; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present valueThe current worth of money expected in the future after applying a discount rate. of payments that remain fully contractual.

A buyer compensates the seller for interest accrued between coupon dates. The market valueThe price at which an asset could trade in the market at a given time. remains sensitive to rates, liquidityThe ease and speed with which an investment can be converted into cash without a major price concession. and the issuer's perceived ability to pay.

A fixed-income review of Accrued Interest should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatilityThe degree and frequency of price or return fluctuations.; fixed cash flows do not imply a fixed market value.

A covenant requiring the borrower to take specified actions.

Example: The issuer must maintain insurance and provide audited statements.

Affirmative Covenant is a covenant requiring the borrower to take specified actions; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

The issuer must maintain insurance and provide audited statements. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

Compare Affirmative Covenant using yield to maturityThe date when a debt investment's principal is scheduled to be repaid. or another consistent yield measure, then test the effect of rate changes, default and reinvestmentUsing distributions or proceeds to buy additional units instead of receiving cash. at lower rates; a high yield normally signals a lower price, greater risk or both.

A bond issued by a government agency or government-sponsored entity.

Example: A housing agency issues bonds to finance mortgages.

Agency Bond is a bond issued by a government agency or government-sponsored entity; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

A housing agency issues bonds to finance mortgages. An investorA person or organisation that commits capital with the expectation of a financial return. selling before maturity may realise a different return because the market price has changed.

A fixed-income review of Agency Bond should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; a high yield normally signals a lower price, greater risk or both.

A bond that repays principalThe original amount of money invested or lent, excluding later returns. in instalments before final maturity.

Example: The issuer repays 20% of principal each year for five years.

Amortising Bond is a bond that repays principal in instalments before final maturity; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

The issuer repays 20% of principal each year for five years.

Compare Amortising Bond using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; holding to maturity reduces price uncertainty only if the issuer pays as promised.

A securityA tradable financial claim or ownership interest, such as a share, bond, or fund unit. whose payments are supported by a pool of financial assets such as loans or receivables.

Example: Auto loans are pooled to create an asset-backed security.

Asset-Backed Security is a security whose payments are supported by a pool of financial assets such as loans or receivables. The instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

Auto loans are pooled to create an asset-backed security. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

A fixed-income review of Asset-Backed Security should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; a high yield normally signals a lower price, greater risk or both.

A bond strategy concentrated in short and long maturities with little exposure in the middle.

Example: The portfolioThe complete collection of investments owned by an investor or managed under one mandate. combines Treasury bills with ten-year bonds.

Barbell Strategy is a bond strategy concentrated in short and long maturities with little exposure in the middle; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

The portfolio combines Treasury bills with ten-year bonds.

A fixed-income review of Barbell Strategy should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility.

One hundredth of one percentage point.

Example: A rise from 10.00% to 10.50% is an increase of 50 basis points.

Basis Point describes one hundredth of one percentage point; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

A rise from 10.00% to 10.50% is an increase of 50 basis points.

Compare Basis Point using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; inflationA sustained increase in the general price level, reducing the purchasing power of money. can erode purchasing powerThe quantity of goods and services that a sum of money can buy. even when every payment arrives.

A debt securityA financial instrument representing money borrowed by an issuer and owed to investors. through which an investor lends money to an issuer in return for promised payments.

Example: An investor buys a five-year bond that pays interest every six months and repays principal at maturity.

A bond is a loan cut into tradeable pieces. The issuer, a government or company, borrows from investors and promises two things: periodic interest (the coupon) and repayment of the face value at maturity. Buy a 5-year ₦1,000,000 bond with a 16% coupon and you receive ₦160,000 a year, then your ₦1,000,000 back.

The mechanic every bondholder must internalise: price and yield move inversely. Bonds trade after issuance, and when market rates rise to 20%, nobody pays full price for your 16% bond; its price falls until its yield to a new buyer matches the market. Rates fall, and the reverse happens. Holding to maturity makes the interim price swings irrelevant, assuming the issuer pays; selling early crystallises them.

Two risks price every bond: interest-rate riskThe possibility that changing market interest rates will reduce an investment's value or income appeal., larger for longer maturities, and credit riskThe possibility that a borrower or issuer will fail to make promised payments or suffer a downgrade., the chance the issuer fails to pay, which is why the FGN borrows cheaper than any Nigerian company.

Retail routes into bonds in Nigeria: FGN savings bonds directly, FGN and corporate bonds through brokers, and bond funds for diversified exposure without the mechanics.

A strategy matching assets and liabilities so interest-rate changes have limited effect on the ability to meet a future obligation.

Example: A pension fundA pool of retirement assets invested on behalf of members or beneficiaries. aligns portfolio durationA measure of a fixed-income portfolio's sensitivity to changes in interest rates. with the timing of benefit payments.

Bond Immunisation is a strategy matching assets and liabilities so interest-rate changes have limited effect on the ability to meet a future obligation; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

A pension fund aligns portfolio duration with the timing of benefit payments.

Read the term sheetA preliminary document outlining the main commercial terms of a proposed investment. or prospectusThe formal document explaining a fund's objective, strategy, risks, fees, governance, and dealing rules. for Bond Immunisation and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. Fixed cash flows do not imply a fixed market value.

The legal contract setting out a bond's terms, rights, covenants, and remedies.

Example: The indenture explains coupon dates, default events, and collateral.

Bond Indenture is the legal contract setting out a bond's terms, rights, covenants, and remedies; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

The indenture explains coupon dates, default events, and collateral.

A fixed-income review of Bond Indenture should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; fixed cash flows do not imply a fixed market value.

A bond that repays all principal at final maturity rather than through scheduled amortisationThe systematic allocation of an intangible asset's cost over its useful life..

Example: The five-year bullet bond returns the full face value in year five.

Bullet Bond is a bond that repays all principal at final maturity rather than through scheduled amortisation; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

The five-year bullet bond returns the full face value in year five. An investor selling before maturity may realise a different return because the market price has changed.

Compare Bullet Bond using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates.

A bond strategy concentrating maturities around one target date.

Example: A university fund holds bonds maturing near the year a building project begins.

Bullet Strategy is a bond strategy concentrating maturities around one target date; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

A university fund holds bonds maturing near the year a building project begins. An investor selling before maturity may realise a different return because the market price has changed.

For Bullet Strategy, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; holding to maturity reduces price uncertainty only if the issuer pays as promised.

A bond the issuer may redeem before maturity under specified terms.

Example: The issuer calls the bond after market interest rates fall.

Callable Bond is a bond the issuer may redeem before maturity under specified terms; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

The issuer calls the bond after market interest rates fall.

For Callable Bond, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions.

The mix and ranking of a company's debt, preferred securities, and equity financing.

Example: An analyst studies the capital structure to estimate recovery values.

Capital Structure is the mix and ranking of a company's debt, preferred securities, and equity financing; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

An analyst studies the capital structure to estimate recovery values. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

Compare Capital Structure using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; fixed cash flows do not imply a fixed market value.

Building a portfolio whose coupons and maturities directly fund scheduled liabilities.

Example: Bond payments are arranged to cover each year's pension obligations.

Cash-Flow Matching describes building a portfolio whose coupons and maturities directly fund scheduled liabilities; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

For example, bond payments are arranged to cover each year's pension obligations. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

Compare Cash-Flow Matching using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; a high yield normally signals a lower price, greater risk or both.

A bond price quoted without accrued interest.

Example: The dealer quotes a clean price of ₦98 per ₦100 face value.

Clean Price is a bond price quoted without accrued interest; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

The dealer quotes a clean price of ₦98 per ₦100 face value. An investor selling before maturity may realise a different return because the market price has changed.

Read the term sheet or prospectus for Clean Price and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. Inflation can erode purchasing power even when every payment arrives.

An asset pledged to secure repayment of an obligation.

Example: The lender may seize pledged propertyLand and buildings held for use, rent, development, or capital appreciation. if the borrower defaults.

Collateral is an asset pledged to secure repayment of an obligation; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

The lender may seize pledged property if the borrower defaults. An investor selling before maturity may realise a different return because the market price has changed.

For Collateral, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; fixed cash flows do not imply a fixed market value.

A structured security backed by a portfolio of debt and divided into tranches with different risk priorities.

Example: The senior tranche absorbs losses only after junior tranches are depleted.

Collateralised Debt Obligation is a structured security backed by a portfolio of debt and divided into tranches with different risk priorities. The economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

The senior tranche absorbs losses only after junior tranches are depleted. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

A fixed-income review of Collateralised Debt Obligation should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; fixed cash flows do not imply a fixed market value.

A bond that may be converted into a stated number of shares under defined conditions.

Example: The bondholder converts after the company's share priceThe market price at which one share is quoted or traded. rises sharply.

Convertible Bond is a bond that may be converted into a stated number of shares under defined conditions; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

For example, the bondholder converts after the company's share price rises sharply. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

Compare Convertible Bond using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; inflation can erode purchasing power even when every payment arrives.

A measure of how a bond's duration changes as yields change, improving estimates for larger rate moves.

Example: Higher positive convexity reduces the error in a simple duration estimate.

Convexity is a measure of how a bond's duration changes as yields change, improving estimates for larger rate moves; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

Higher positive convexity reduces the error in a simple duration estimate.

A fixed-income review of Convexity should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; holding to maturity reduces price uncertainty only if the issuer pays as promised.

A bond issued by a company.

Example: A telecom company sells corporate bonds to fund network expansion.

Corporate Bond is a bond issued by a company; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

A telecom company sells corporate bonds to fund network expansion. An investor selling before maturity may realise a different return because the market price has changed.

For Corporate Bond, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; a high yield normally signals a lower price, greater risk or both.

The periodic interest payment made by a bond issuer to the holder.

Example: A 10% coupon on ₦100,000 pays ₦10,000 a year.

The coupon is a bond's promised interest payment, set at issuance as a percentage of face value and, for standard bonds, fixed for life. A ₦1,000,000 bond with a 16% coupon pays ₦160,000 a year, in Nigeria typically as two semi-annual payments of ₦80,000, regardless of what happens to the bond's market price afterwards.

That last clause is the concept's whole subtlety. The coupon rate is anchored to face value, not to what you paid. Buy that bond in the secondary marketThe market in which existing securities trade among investors. at ₦900,000 and you still receive ₦160,000 a year, which is a 17.8% current yield on your money; pay ₦1,100,000 and the same cash is 14.5%. Coupon rate, current yield, and yield to maturity are three different numbers that only coincide for a bond bought exactly at face value.

The name is a fossil: paper bonds once carried physical coupons clipped and presented for payment. The payments now arrive electronically, into the account your broker or the registrarThe service provider that maintains ownership records and processes specified investor entitlements. holds on file.

For income planning, coupons are the attraction: known amounts on known dates, the closest thing investing offers to a salary, subject only to the issuer's ability to pay.

The annual coupon amount expressed as a percentage of a bond's face value.

Example: A bond paying ₦12,000 yearly on ₦100,000 face value has a 12% coupon rate.

Coupon Rate is the annual coupon amount expressed as a percentage of a bond's face value; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

A bond paying ₦12,000 yearly on ₦100,000 face value has a 12% coupon rate. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

For Coupon Rate, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; a high yield normally signals a lower price, greater risk or both.

A contractual promise or restriction designed to protect lenders or govern borrower behaviour.

Example: The bond covenant limits additional borrowing above a stated leverageThe use of borrowed money or derivatives to increase exposure relative to invested capital. ratio.

Covenant is a contractual promise or restriction designed to protect lenders or govern borrower behaviour; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

The bond covenant limits additional borrowing above a stated leverage ratio. An investor selling before maturity may realise a different return because the market price has changed.

Compare Covenant using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates.

A bond backed both by the issuer and by a dedicated pool of assets that remains on the issuer's balance sheetA statement showing assets, liabilities, and equity at a particular date..

Example: MortgageA loan secured by real property. loans form the cover pool supporting the bond.

Covered Bond is a bond backed both by the issuer and by a dedicated pool of assets that remains on the issuer's balance sheet; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

Mortgage loans form the cover pool supporting the bond. An investor selling before maturity may realise a different return because the market price has changed.

For Covered Bond, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; holding to maturity reduces price uncertainty only if the issuer pays as promised.

The evaluation of a borrower's ability and willingness to repay debt.

Example: An analyst studies leverage, cash flow, collateral, and industryA more specific group of companies with closely related products or services. conditions.

Credit Analysis is the evaluation of a borrower's ability and willingness to repay debt; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

An analyst studies leverage, cash flow, collateral, and industry conditions. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

A fixed-income review of Credit Analysis should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; fixed cash flows do not imply a fixed market value.

A feature that improves a debt instrument's ability to absorb losses or make promised payments.

Example: A guarantee and reserve account provide credit enhancement.

Credit Enhancement is a feature that improves a debt instrument's ability to absorb losses or make promised payments; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

For example, a guarantee and reserve account provide credit enhancement. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

Read the term sheet or prospectus for Credit Enhancement and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield.

An opinion about an issuer's or instrument's relative ability to meet financial obligations.

Example: A downgrade can increase a company's borrowing cost.

Credit Rating is an opinion about an issuer's or instrument's relative ability to meet financial obligations; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

For example, a downgrade can increase a company's borrowing cost. An investor selling before maturity may realise a different return because the market price has changed.

Compare Credit Rating using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; holding to maturity reduces price uncertainty only if the issuer pays as promised.

The extra yield a debt security offers over a lower-risk reference security of similar maturity.

Example: A corporate bond yields 4 percentage points above a government bond.

Credit Spread is the extra yield a debt security offers over a lower-risk reference security of similar maturity; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

A corporate bond yields 4 percentage points above a government bond.

A fixed-income review of Credit Spread should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; inflation can erode purchasing power even when every payment arrives.

A clause under which default on one obligation triggers default on another.

Example: A missed bank loan payment causes the company's bonds to enter default.

Cross-Default is a clause under which default on one obligation triggers default on another; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

A missed bank loan payment causes the company's bonds to enter default. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

Read the term sheet or prospectus for Cross-Default and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield.

Annual coupon income divided by the bond's current market price.

Example: A bond paying ₦10 yearly and priced at ₦80 has a 12.5% current yield.

Current Yield means annual coupon income divided by the bond's current market price; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

In formula form, the measure uses annual coupon income as the numerator and the bond's current market price as the denominator. A bond paying ₦10 yearly and priced at ₦80 has a 12.5% current yield. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

For Current Yield, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; inflation can erode purchasing power even when every payment arrives.

A long-term debtBorrowings due more than one year from the reporting date. instrument, often unsecured depending on the jurisdiction.

Example: The company issues a five-year debenture to institutional investors.

Debenture is a long-term debt instrument, often unsecured depending on the jurisdiction; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

The company issues a five-year debenture to institutional investors.

For Debenture, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; inflation can erode purchasing power even when every payment arrives.

The amount of debt an entity can reasonably support without excessive default riskThe risk that an issuer does not pay interest or principal when due..

Example: Stable utility cash flows may support more debt capacity than cyclical earnings.

Debt Capacity is the amount of debt an entity can reasonably support without excessive default risk; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

Stable utility cash flows may support more debt capacity than cyclical earnings. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

Read the term sheet or prospectus for Debt Capacity and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. Fixed cash flows do not imply a fixed market value.

Cash flow available for debt service divided by required interest and principal payments.

Example: A project generating ₦150 million against ₦100 million of debt service has a 1.5 coverage ratio.

Debt-Service Coverage Ratio means cash flow available for debt service divided by required interest and principal payments; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

In formula form, the measure uses cash flow available for debt service as the numerator and required interest and principal payments as the denominator. A project generating ₦150 million against ₦100 million of debt service has a 1.5 coverage ratio. An investor selling before maturity may realise a different return because the market price has changed.

A fixed-income review of Debt-Service Coverage Ratio should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; holding to maturity reduces price uncertainty only if the issuer pays as promised.

Failure to meet a contractual obligation, such as paying interest or principal when due.

Example: The issuer enters default after missing a scheduled coupon payment.

Default describes failure to meet a contractual obligation, such as paying interest or principal when due; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

For example, the issuer enters default after missing a scheduled coupon payment. An investor selling before maturity may realise a different return because the market price has changed.

A fixed-income review of Default should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility.

A bond's clean price plus accrued interest.

Example: The investor pays the dirty price when the trade settles.

Dirty Price is a bond's clean price plus accrued interest; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

The investor pays the dirty price when the trade settles. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

A fixed-income review of Dirty Price should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; a high yield normally signals a lower price, greater risk or both.

A bond trading below its face value.

Example: A ₦1,000 bond priced at ₦940 is a discount bond.

Discount Bond is a bond trading below its face value; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

A ₦1,000 bond priced at ₦940 is a discount bond.

Compare Discount Bond using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates. Also compare Face Value, defined here as the principal amount stated on a bond and usually repaid at maturity.

A duration measure that estimates price sensitivity when cash flows may change because of embedded options.

Example: Analysts use effective duration for mortgage-backed securities.

Effective Duration is a duration measure that estimates price sensitivity when cash flows may change because of embedded options. Duration is expressed in years but functions mainly as a price-sensitivity measure; it is not the same as the date on which principal is repaid.

Analysts use effective duration for mortgage-backed securities.

A fixed-income review of Effective Duration should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility.

A bond issued in a currency different from the currency of the country or market where it is issued; in African markets the term often refers to foreign-currency sovereign debt sold internationally.

Example: A government issues a US-dollar Eurobond to international investors.

A Eurobond is a bond issued outside the issuer's home market, in a currency foreign to the place of issuance, most commonly dollars. The prefix has nothing to do with the euro or Europe as such; it is a market-structure term from the instrument's origins. Nigeria's dollar bonds listed in London are Eurobonds; so are a Nigerian bank's dollar notes.

The structure exists to reach international capital. Issuers tap deep dollar-investor pools at scale, under international (typically English) law, with disputes resolved outside the issuer's courts, terms that let emerging-market borrowers raise sums their domestic markets cannot supply.

For the investor, a Eurobond splits currency riskThe possibility that exchange-rate movements will change an investment's value in the investor's home currency. from credit risk cleanly. Holding a Nigerian EurobondA foreign-currency bond issued internationally by the Federal Government of Nigeria., you carry no naira exposure, coupons and principal are dollars, but full exposure to Nigeria's ability and willingness to pay dollars it cannot print. The yield spread over US Treasuries is the running price of that credit risk.

Nigerian retail access is indirect as a rule: minimum denominations around $200,000 put direct holdings out of reach, so dollar funds holding these bonds are the practical route. See the Nigerian Eurobond entry for the sovereign specifics.

A contractually defined event that gives lenders or bondholders specified remedies.

Example: Failure to pay principal after the grace period is an event of default.

Event of Default is a contractually defined event that gives lenders or bondholders specified remedies; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

Failure to pay principal after the grace period is an event of default. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

For Event of Default, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions.

A bond that may be exchanged for shares of a company other than the issuer.

Example: A holding company issues debt exchangeable into shares of its listed subsidiary.

Exchangeable Bond is a bond that may be exchanged for shares of a company other than the issuer; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

A holding company issues debt exchangeable into shares of its listed subsidiary.

Compare Exchangeable Bond using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; a high yield normally signals a lower price, greater risk or both.

The principal amount stated on a bond and usually repaid at maturity.

Example: A bond with a ₦1,000 face value returns ₦1,000 at maturity unless it defaults.

Face Value is the principal amount stated on a bond and usually repaid at maturity; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

A bond with a ₦1,000 face value returns ₦1,000 at maturity unless it defaults.

A fixed-income review of Face Value should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; holding to maturity reduces price uncertainty only if the issuer pays as promised.

A bond whose coupon rate remains unchanged for its stated life.

Example: A seven-year bond pays a fixed 14% coupon each year.

Fixed-Rate Bond is a bond whose coupon rate remains unchanged for its stated life; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

A seven-year bond pays a fixed 14% coupon each year. An investor selling before maturity may realise a different return because the market price has changed.

Compare Fixed-Rate Bond using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; inflation can erode purchasing power even when every payment arrives.

A yield curve with little difference between short- and long-term yields.

Example: One-year and ten-year bonds both yield close to 12%.

Flat Yield Curve is a yield curve with little difference between short- and long-term yields; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

One-year and ten-year bonds both yield close to 12%. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

A fixed-income review of Flat Yield Curve should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; inflation can erode purchasing power even when every payment arrives.

A debt security whose coupon resets periodically using a reference rate plus or minus a spread.

Example: A note pays the policy rateThe benchmark interest rate set or targeted by a central bank to influence financial conditions. plus 2% and resets every quarter.

Floating-Rate Note is a debt security whose coupon resets periodically using a reference rate plus or minus a spread; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

A note pays the policy rate plus 2% and resets every quarter. An investor selling before maturity may realise a different return because the market price has changed.

Read the term sheet or prospectus for Floating-Rate Note and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. Fixed cash flows do not imply a fixed market value.

A bond denominated in a currency different from the investor's or issuer's domestic currency.

Example: A Nigerian company issues a dollar bond to finance imported equipment.

Foreign-Currency Bond is a bond denominated in a currency different from the investor's or issuer's domestic currency; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

A Nigerian company issues a dollar bond to finance imported equipment.

Compare Foreign-Currency Bond using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; fixed cash flows do not imply a fixed market value.

An interest rateThe price of borrowing money or the return paid for lending it. implied today for borrowing or investing during a future period.

Example: Current bond prices imply a one-year rate beginning two years from now.

Forward Rate is an interest rate implied today for borrowing or investing during a future period; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

Current bond prices imply a one-year rate beginning two years from now.

Compare Forward Rate using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates.

A debt security issued by a government or government treasury.

Example: A pension fund buys government bonds to earn long-term income.

A government bond is sovereign borrowing at tenors beyond a year, in Nigeria's case, FGN bonds in naira and Eurobonds in dollars. Within its own currency, the federal government is the benchmarkA reference index or rate used to evaluate a fund's performance. borrower: it taxes, and ultimately prints, the naira it owes, making FGN bonds the closest thing to default-free naira assets.

That status does the market's structural work. FGN bondA naira-denominated bond issued by the Federal Government of Nigeria. yields form the risk-free curve every other naira borrowing prices against: states, banks, and corporates all pay spreads above the government. When commentary cites "the 10-year yield," this curve is the reference.

Default-free is not risk-free, and the distinction is the Nigerian investor's essential lesson. FGN bonds carry full interest-rate risk (long bonds swing hard when rates move) and, above all, inflation and currency risk: a bond that reliably pays every naira promised can still lose purchasing power to inflation and dollar value to devaluationAn official reduction in the value of a currency under a managed or fixed exchange-rate system.. The government's dollar bonds carry genuine default risk, which is exactly what their spreads over US Treasuries price.

Access runs through the DMO's instruments: savings bonds for small amounts, regular FGN bonds via brokers, bond funds for pooled exposure.

A bond whose proceeds are designated for eligible environmental projects.

Example: A power company issues a green bond to finance solar generation.

Green Bond is a bond whose proceeds are designated for eligible environmental projects; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

A power company issues a green bond to finance solar generation. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

Read the term sheet or prospectus for Green Bond and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield.

A contractual promise by another party to meet an obligation if the primary debtor does not.

Example: A parent company guarantees its subsidiary's bond payments.

Guarantee is a contractual promise by another party to meet an obligation if the primary debtor does not; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

A parent company guarantees its subsidiary's bond payments. An investor selling before maturity may realise a different return because the market price has changed.

For Guarantee, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; holding to maturity reduces price uncertainty only if the issuer pays as promised.

A bond rated below investmentAn asset or commitment of money made with the expectation of future income, growth, or both. grade and offering higher yield to compensate for greater credit risk.

Example: A leveraged company issues high-yield bonds at 18%.

High-Yield Bond is a bond rated below investment grade and offering higher yield to compensate for greater credit risk. The instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

A leveraged company issues high-yield bonds at 18%. An investor selling before maturity may realise a different return because the market price has changed.

Compare High-Yield Bond using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; fixed cash flows do not imply a fixed market value.

A bond whose payments are linked to an index such as inflation, a commodityA standardised physical good such as gold, crude oil, wheat, or cocoa. price, or an interest rate.

Example: The coupon adjusts with a consumer-price index.

Index-Linked Bond is a bond whose payments are linked to an index such as inflation, a commodity price, or an interest rate; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

The coupon adjusts with a consumer-price index.

Compare Index-Linked Bond using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates.

A bond whose principal or coupon is adjusted using an inflation measure.

Example: The principal rises with inflation, helping preserve purchasing power.

Inflation-Linked Bond is a bond whose principal or coupon is adjusted using an inflation measure; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

The principal rises with inflation, helping preserve purchasing power. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

Read the term sheet or prospectus for Inflation-Linked Bond and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. Inflation can erode purchasing power even when every payment arrives.

A measure of how many times operating earnings cover interest expense.

Example: EBIT of ₦300 million and interest of ₦100 million produce three-times coverage.

Interest Coverage Ratio is a measure of how many times operating earnings cover interest expense; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

EBIT of ₦300 million and interest of ₦100 million produce three-times coverage. An investor selling before maturity may realise a different return because the market price has changed.

A fixed-income review of Interest Coverage Ratio should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility.

The degree to which an investment's price responds to changes in market interest rates.

Example: Long-duration bonds have greater interest-rate sensitivity.

Interest-Rate Sensitivity is the degree to which an investment's price responds to changes in market interest rates; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

Long-duration bonds have greater interest-rate sensitivity. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

Compare Interest-Rate Sensitivity using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; fixed cash flows do not imply a fixed market value.

A yield curve in which shorter maturities yield more than longer maturities.

Example: Two-year government debt yields more than ten-year debt.

Inverted Yield Curve is a yield curve in which shorter maturities yield more than longer maturities; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

Two-year government debt yields more than ten-year debt.

For Inverted Yield Curve, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions. Also compare Normal Yield Curve, defined here as a yield curve in which longer maturities generally yield more than shorter maturities.

A credit-rating category generally associated with lower default risk than speculative-grade debt.

Example: Many regulated portfolios limit bond holdings to investment-grade issuers.

Investment Grade is a credit-rating category generally associated with lower default risk than speculative-grade debt; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

Many regulated portfolios limit bond holdings to investment-grade issuers. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

For Investment Grade, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; fixed cash flows do not imply a fixed market value.

The government, company, or organisation that creates and sells a security.

Example: The federal government is the issuer of a sovereign bond.

Issuer is the government, company, or organisation that creates and sells a security; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

The federal government is the issuer of a sovereign bond. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

For Issuer, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; holding to maturity reduces price uncertainty only if the issuer pays as promised.

An informal term for a below-investment-grade bond.

Example: The bond's high coupon reflects its junk rating and elevated default risk.

Junk Bond is an informal term for a below-investment-grade bond; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

For example, the bond's high coupon reflects its junk rating and elevated default risk.

For Junk Bond, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; a high yield normally signals a lower price, greater risk or both.

A measure of price sensitivity to a yield change at one specific maturity on the yield curve.

Example: A portfolio may be most sensitive to changes in the five-year rate.

Key Rate Duration is a measure of price sensitivity to a yield change at one specific maturity on the yield curve. Duration is expressed in years but functions mainly as a price-sensitivity measure; it is not the same as the date on which principal is repaid.

A portfolio may be most sensitive to changes in the five-year rate.

Compare Key Rate Duration using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; fixed cash flows do not imply a fixed market value.

A measure comparing debt with earnings, assets, or equity.

Example: Net debt equal to four times EBITDAEarnings before interest, tax, depreciation, and amortisation. indicates significant leverage.

Leverage Ratio is a measure comparing debt with earnings, assets, or equity; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

Net debt equal to four times EBITDA indicates significant leverage. An investor selling before maturity may realise a different return because the market price has changed.

Compare Leverage Ratio using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; fixed cash flows do not imply a fixed market value.

Selecting investments whose cash flows align with expected future payments.

Example: A company buys bonds that mature when employee benefits become due.

Liability Matching describes selecting investments whose cash flows align with expected future payments; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

A company buys bonds that mature when employee benefits become due. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

Read the term sheet or prospectus for Liability Matching and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. Fixed cash flows do not imply a fixed market value.

A bond denominated in the issuer's domestic currency.

Example: A naira bond exposes a foreign investor to exchange-rate movements.

Local-Currency Bond is a bond denominated in the issuer's domestic currency; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

A naira bond exposes a foreign investor to exchange-rate movements. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

Read the term sheet or prospectus for Local-Currency Bond and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. Inflation can erode purchasing power even when every payment arrives.

The percentage of exposure lost after accounting for recoveries when a borrower defaults.

Example: A 35% recovery rate implies a 65% loss given default.

Loss Given Default is the percentage of exposure lost after accounting for recoveries when a borrower defaults; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

A 35% recovery rate implies a 65% loss given default. An investor selling before maturity may realise a different return because the market price has changed.

For Loss Given Default, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; a high yield normally signals a lower price, greater risk or both.

The weighted average time until a bond's cash flows are received.

Example: A bond with distant cash flows has a longer Macaulay duration.

Macaulay Duration is the weighted average time until a bond's cash flows are received. Duration is expressed in years but functions mainly as a price-sensitivity measure; it is not the same as the date on which principal is repaid.

A bond with distant cash flows has a longer Macaulay duration. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

A fixed-income review of Macaulay Duration should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; inflation can erode purchasing power even when every payment arrives.

The date on which a debt instrument's remaining principal becomes due.

Example: The bond's maturity date is 30 June 2031.

Maturity Date is the date on which a debt instrument's remaining principal becomes due; maturity is contractual, while duration is analytical. Two bonds maturing on the same date can have different duration because their coupons and cash-flow timing differ.

The bond's maturity date is 30 June 2031.

For Maturity Date, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; a high yield normally signals a lower price, greater risk or both.

A portfolio of debt instruments with maturities spread across regular intervals.

Example: A ladder holds bonds maturing each year from 2027 through 2032.

Maturity Ladder is a portfolio of debt instruments with maturities spread across regular intervals; maturity is contractual, while duration is analytical. Two bonds maturing on the same date can have different duration because their coupons and cash-flow timing differ.

For example, a ladder holds bonds maturing each year from 2027 through 2032. An investor selling before maturity may realise a different return because the market price has changed.

Read the term sheet or prospectus for Maturity Ladder and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. A high yield normally signals a lower price, greater risk or both.

An estimate of the percentage price change for a one-percentage-point change in yield.

Example: A modified duration of four implies roughly a 4% price decline if yields rise one point.

Modified Duration is an estimate of the percentage price change for a one-percentage-point change in yield. Duration is expressed in years but functions mainly as a price-sensitivity measure; it is not the same as the date on which principal is repaid.

For example, a modified duration of four implies roughly a 4% price decline if yields rise one point. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

Compare Modified Duration using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; holding to maturity reduces price uncertainty only if the issuer pays as promised.

A security whose cash flows come from a pool of mortgage loans.

Example: Homeowner principal and interest payments support the MBS.

Mortgage-Backed Security is a security whose cash flows come from a pool of mortgage loans; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

Homeowner principal and interest payments support the MBS.

For Mortgage-Backed Security, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; fixed cash flows do not imply a fixed market value.

A bond issued by a state, city, local authority, or related public entity.

Example: A city issues a municipal bond to finance water infrastructure.

Municipal Bond is a bond issued by a state, city, local authority, or related public entity; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

A city issues a municipal bond to finance water infrastructure. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

Compare Municipal Bond using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates.

A covenant restricting the borrower from specified actions.

Example: The company may not pledge key assets without bondholder consent.

Negative Covenant is a covenant restricting the borrower from specified actions; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

The company may not pledge key assets without bondholder consent. An investor selling before maturity may realise a different return because the market price has changed.

Read the term sheet or prospectus for Negative Covenant and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. Inflation can erode purchasing power even when every payment arrives.

Interest-bearing debt minus cash and cash equivalentsCash plus highly liquid short-term investments with insignificant value-change risk..

Example: A company with ₦10 billion debt and ₦3 billion cash has ₦7 billion net debt.

Net Debt describes interest-bearing debt minus cash and cash equivalents; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

A company with ₦10 billion debt and ₦3 billion cash has ₦7 billion net debt.

Compare Net Debt using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; a high yield normally signals a lower price, greater risk or both.

A yield curve in which longer maturities generally yield more than shorter maturities.

Example: Ten-year bonds yield more than one-year bills in a normal curve.

Normal Yield Curve is a yield curve in which longer maturities generally yield more than shorter maturities; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

Ten-year bonds yield more than one-year bills in a normal curve. An investor selling before maturity may realise a different return because the market price has changed.

A fixed-income review of Normal Yield Curve should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; a high yield normally signals a lower price, greater risk or both.

A spread measure that adjusts a bond's yield for embedded options such as calls or prepayments.

Example: Analysts compare callable bonds using option-adjusted spreads.

Option-Adjusted Spread is a spread measure that adjusts a bond's yield for embedded options such as calls or prepayments. The instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

Analysts compare callable bonds using option-adjusted spreads. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

A fixed-income review of Option-Adjusted Spread should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; a high yield normally signals a lower price, greater risk or both.

The stated value of a bond or share, often used as the amount repaid at bond maturity.

Example: A bond trading at ₦980 is below its ₦1,000 par value.

Par Value is the stated value of a bond or share, often used as the amount repaid at bond maturity; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

A bond trading at ₦980 is below its ₦1,000 par value. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

For Par Value, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions.

A bond that may pay interest with additional debt rather than cash.

Example: The company preserves cash by issuing more notes as coupon payment.

Payment-in-Kind Bond is a bond that may pay interest with additional debt rather than cash; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

The company preserves cash by issuing more notes as coupon payment. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

A fixed-income review of Payment-in-Kind Bond should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; a high yield normally signals a lower price, greater risk or both.

A bond with no fixed maturity date, although it may contain call provisions.

Example: The perpetual bond pays coupons indefinitely unless the issuer calls it.

Perpetual Bond is a bond with no fixed maturity date, although it may contain call provisions; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

The perpetual bond pays coupons indefinitely unless the issuer calls it. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

A fixed-income review of Perpetual Bond should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; a high yield normally signals a lower price, greater risk or both.

A bond trading above its face value.

Example: A high-coupon bond priced at ₦1,080 trades at a premium.

Premium Bond is a bond trading above its face value; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

A high-coupon bond priced at ₦1,080 trades at a premium. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

Compare Premium Bond using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; fixed cash flows do not imply a fixed market value.

The estimated likelihood that a borrower will default during a stated period.

Example: The lender models a 3% one-year probability of default.

Probability of Default is the estimated likelihood that a borrower will default during a stated period; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

The lender models a 3% one-year probability of default. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

For Probability of Default, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; inflation can erode purchasing power even when every payment arrives.

A bond the holder may require the issuer to repurchase before maturity on specified dates.

Example: The investor exercises the put after the issuer's credit quality weakens.

Puttable Bond is a bond the holder may require the issuer to repurchase before maturity on specified dates; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

The investor exercises the put after the issuer's credit quality weakens. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

Read the term sheet or prospectus for Puttable Bond and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. Holding to maturity reduces price uncertainty only if the issuer pays as promised.

An organisation that assesses creditworthiness and assigns credit ratings.

Example: The rating agency reviews the issuer's leverage and cash flow.

Rating Agency is an organisation that assesses creditworthiness and assigns credit ratings; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

The rating agency reviews the issuer's leverage and cash flow. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

Read the term sheet or prospectus for Rating Agency and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. Holding to maturity reduces price uncertainty only if the issuer pays as promised.

The percentage of a creditor's claim recovered after default.

Example: Bondholders recover ₦40 for each ₦100 owed, a 40% recovery rate.

Recovery Rate is the percentage of a creditor's claim recovered after default; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

Bondholders recover ₦40 for each ₦100 owed, a 40% recovery rate. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

Compare Recovery Rate using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; fixed cash flows do not imply a fixed market value.

A bond backed by specified collateral.

Example: Property assets secure the bondholders' claims.

Secured Bond is a bond backed by specified collateral; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

Property assets secure the bondholders' claims. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

Read the term sheet or prospectus for Secured Bond and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield.

Debt that ranks ahead of subordinated claims in repayment priority.

Example: Senior lenders are paid before junior bondholders in liquidationThe process of selling an entity's assets, paying creditors, and distributing any remainder to owners..

Senior Debt means debt that ranks ahead of subordinated claims in repayment priority; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

Senior lenders are paid before junior bondholders in liquidation.

Read the term sheet or prospectus for Senior Debt and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield.

The order in which claims are paid relative to other claims.

Example: Secured senior debt has higher seniority than ordinary shares.

Seniority is the order in which claims are paid relative to other claims; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

Secured senior debt has higher seniority than ordinary shares. An investor selling before maturity may realise a different return because the market price has changed.

For Seniority, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; holding to maturity reduces price uncertainty only if the issuer pays as promised.

A bond supported by a sinking-fund arrangement that retires part of the issue over time.

Example: The issuer buys back a portion of the bonds annually.

Sinkable Bond is a bond supported by a sinking-fund arrangement that retires part of the issue over time; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

The issuer buys back a portion of the bonds annually. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

Read the term sheet or prospectus for Sinkable Bond and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. Fixed cash flows do not imply a fixed market value.

A bond whose proceeds finance projects intended to produce defined social benefits.

Example: A development bank funds affordable housing through a social bond.

Social Bond is a bond whose proceeds finance projects intended to produce defined social benefits; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

A development bank funds affordable housing through a social bond.

A fixed-income review of Social Bond should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; a high yield normally signals a lower price, greater risk or both.

A bond issued by a national government.

Example: A country issues a ten-year local-currency sovereign bond.

Sovereign Bond is a bond issued by a national government; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

A country issues a ten-year local-currency sovereign bond. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

Compare Sovereign Bond using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; fixed cash flows do not imply a fixed market value.

The yield on a zero-coupon cash flow occurring at a specific future date.

Example: The five-year spot rate discounts a single payment due in five years.

Spot Rate is the yield on a zero-coupon cash flow occurring at a specific future date; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

The five-year spot rate discounts a single payment due in five years. An investor selling before maturity may realise a different return because the market price has changed.

Compare Spot Rate using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; fixed cash flows do not imply a fixed market value.

A yield curve with a large gap between short- and long-term yields.

Example: Short bills yield 8% while long bonds yield 15%.

Steep Yield Curve is a yield curve with a large gap between short- and long-term yields; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

Short bills yield 8% while long bonds yield 15%. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

A fixed-income review of Steep Yield Curve should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; holding to maturity reduces price uncertainty only if the issuer pays as promised.

A debt security issued by a government below the national level.

Example: A state government raises money through a subnational bond.

Subnational Bond is a debt security issued by a government below the national level; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

A state government raises money through a subnational bond. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

Read the term sheet or prospectus for Subnational Bond and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield.

Debt that ranks below senior obligations in repayment priority.

Example: A bank issues subordinated debt that absorbs losses after senior creditors.

Subordinated Debt means debt that ranks below senior obligations in repayment priority; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

A bank issues subordinated debt that absorbs losses after senior creditors. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

Read the term sheet or prospectus for Subordinated Debt and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. Fixed cash flows do not imply a fixed market value.

A bond issued by an international development or multilateral institution.

Example: A regional development bank raises funds through a supranational bond.

Supranational Bond is a bond issued by an international development or multilateral institution; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

A regional development bank raises funds through a supranational bond. An investor selling before maturity may realise a different return because the market price has changed.

Compare Supranational Bond using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; holding to maturity reduces price uncertainty only if the issuer pays as promised.

A bond financing a combination of environmental and social projects.

Example: The proceeds support clean water and healthcare facilities.

Sustainability Bond is a bond financing a combination of environmental and social projects; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

The proceeds support clean water and healthcare facilities. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

Compare Sustainability Bond using yield to maturity or another consistent yield measure, then test the effect of rate changes, default and reinvestment at lower rates; fixed cash flows do not imply a fixed market value.

A bond whose financial terms change if the issuer meets or misses specified sustainability targets.

Example: The coupon rises if the company fails to reduce emissions by the target date.

Sustainability-Linked Bond is a bond whose financial terms change if the issuer meets or misses specified sustainability targets; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

For example, the coupon rises if the company fails to reduce emissions by the target date.

For Sustainability-Linked Bond, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; inflation can erode purchasing power even when every payment arrives.

A breach of a non-payment term in a debt agreement.

Example: The borrower violates a leverage covenant even though interest remains current.

Technical Default is a breach of a non-payment term in a debt agreement; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

The borrower violates a leverage covenant even though interest remains current. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

Read the term sheet or prospectus for Technical Default and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield.

The length of time until a financial instrument matures or a contract ends.

Example: A 182-day bill has a six-month tenor.

Tenor is the length of time until a financial instrument matures or a contract ends; the instrument is shaped by two distinct risks: the issuer may fail to pay, and market yields may change the present value of payments that remain fully contractual.

A 182-day bill has a six-month tenor.

Read the term sheet or prospectus for Tenor and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. Inflation can erode purchasing power even when every payment arrives.

An independent party appointed to represent bondholders and enforce the bond documents.

Example: The trustee acts when the issuer breaches a covenant.

Trustee for Bondholders is an independent party appointed to represent bondholders and enforce the bond documents; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

The trustee acts when the issuer breaches a covenant. An investor selling before maturity may realise a different return because the market price has changed.

For Trustee for Bondholders, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; a high yield normally signals a lower price, greater risk or both.

A bond supported by the issuer's general credit rather than specific collateral.

Example: Investors rely on the company's overall ability to pay.

Unsecured Bond is a bond supported by the issuer's general credit rather than specific collateral; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

Investors rely on the company's overall ability to pay. An investor selling before maturity may realise a different return because the market price has changed.

For Unsecured Bond, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions; holding to maturity reduces price uncertainty only if the issuer pays as promised.

The average time to maturity of a portfolio's holdings, weighted by their values.

Example: A money market fundA mutual fund that invests mainly in short-term, relatively liquid instruments such as treasury bills and deposits. maintains a weighted average maturity of 60 days.

Weighted Average Maturity is the average time to maturity of a portfolio's holdings, weighted by their values; maturity is contractual, while duration is analytical. Two bonds maturing on the same date can have different duration because their coupons and cash-flow timing differ.

For example, a money market fund maintains a weighted average maturity of 60 days. An investor selling before maturity may realise a different return because the market price has changed.

A fixed-income review of Weighted Average Maturity should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; holding to maturity reduces price uncertainty only if the issuer pays as promised.

A line showing yields on similar debt securities across different maturities.

Example: The curve plots three-month, two-year, five-year, and ten-year government yields.

Yield Curve is a line showing yields on similar debt securities across different maturities; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

The curve plots three-month, two-year, five-year, and ten-year government yields. The market value remains sensitive to rates, liquidity and the issuer's perceived ability to pay.

A fixed-income review of Yield Curve should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; inflation can erode purchasing power even when every payment arrives.

The annualised returnA return converted into an equivalent yearly rate to make periods easier to compare. implied if a callable bond is redeemed on a specified call date.

Example: An investor compares yield to call with yield to maturity before buying a callable bond.

Yield to Call is the annualised return implied if a callable bond is redeemed on a specified call date; the economics of the instrument depend on when cash is paid, how the instrument ranks against other claims and the yield demanded by current buyers.

An investor compares yield to call with yield to maturity before buying a callable bond. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

For Yield to Call, inspect the issuer, currency, principal, coupon or discount, payment dates, maturity, seniority, security, yield basis, duration, liquidity and default provisions.

The annualised return implied by a bond's price if held to maturity and all promised payments occur and are reinvested as assumed.

Example: A discount bond may have a yield to maturity above its coupon rate.

Yield to maturity is a bond's true total returnThe complete investment result from price changes plus income, assuming distributions are included. if held to the end: the single rate that accounts for every coupon payment plus the gain or loss between your purchase price and the face value repaid at maturity. It is the number that makes bonds comparable, and the one professionals mean when they say "this bond yields 18%."

The moving part is the price you pay. A 16%-coupon bond bought below face value yields more than 16% to maturity, because you also pocket the pull to par, the guaranteed drift from your discounted price up to full face value at redemptionThe process of selling fund units back to the fund in exchange for cash.. Bought above face value, the same bond yields less than its coupon. YTM folds coupon income and that price convergenceThe tendency of a futures price and spot price to move together as expiration approaches. into one figure.

Its assumptions deserve honesty: YTM presumes you hold to maturity and reinvest each coupon at the same rate, an approximation that wobbles when rates move. Sell early and your realised return depends on the price that day, not the YTM you bought.

Practical use: compare bonds on YTM, never on coupon; a high coupon at a high priceThe highest traded price during a stated period. can yield less than a modest coupon bought cheap. Quoted secondary-market "yields" on FGN bonds are YTMs.

The lowest yield among specified redemption scenarios that do not assume issuer default.

Example: A callable bond's yield to worst may be its yield to the earliest call date.

Yield to Worst is the lowest yield among specified redemption scenarios that do not assume issuer default; separate promised cash flows from market price. Interest-rate changes can move the price even when the issuer remains able to pay.

A callable bond's yield to worst may be its yield to the earliest call date. Credit events, reinvestment rates, accrued interest and transaction price can alter the amount ultimately earned.

Read the term sheet or prospectus for Yield to Worst and map every cash flow; do not rely on the coupon alone, because purchase price and maturity determine the actual yield. Inflation can erode purchasing power even when every payment arrives.

A bond that pays no periodic coupon and is issued or traded below the amount repaid at maturity.

Example: An investor pays ₦70,000 today and receives ₦100,000 at maturity.

Zero-Coupon Bond is a bond that pays no periodic coupon and is issued or traded below the amount repaid at maturity; the instrument sits within the exchange of money today for contractual cash flows later. Coupon, maturity, principal, seniority, credit quality and market yield determine the value.

An investor pays ₦70,000 today and receives ₦100,000 at maturity. An investor selling before maturity may realise a different return because the market price has changed.

A fixed-income review of Zero-Coupon Bond should distinguish government from corporate credit, nominal from inflation-adjusted return and hold-to-maturity income from mark-to-market volatility; a high yield normally signals a lower price, greater risk or both.