S

Secondary Market
Bonds which have been issued and then trade subsequent to the original issue are said to be trading in the secondary market.

Settlement Date
When a bond trade takes place, the buyer and seller agree on a date when the buyer will pay for the bonds and the seller will deliver the bonds. For municipal bonds and corporate bonds, the settlement date is typically 3 business days after the trade date. For Treasury and zero coupon bonds the settlement date is typically the next business day after the trade.

Sinking Fund
Some municipal or corporate bonds are issued with a sinking fund provision, which could be optional or mandatory. In the case of a sinking fund the issuer pays off the principal of the bond over time, for example 10% of the principal in each of the last 10 years of the life of the bond. If the sinking fund is mandatory the issuer must make these payments each year.

Spread
The spread of a bond refers to the difference between the yield of the bond and the yield of a Treasury bond with a comparable maturity. Since the Treasury yield is considered risk-free, the spread reflects the risk premium of the bond. The spread is expressed in basis points (1/100^th of 1 percent.).

Standard & Poors
One of the major credit rating companies.

State
This is the state in which the bond was issued. This is important for tax purposes since in some states interest earned from municipal bonds is exempt from state tax for investors who live in the state where the bond was issued. State will only appear on queries for municipal bonds. Click here for more information about states.

STRIPS
A Zero Coupon Treasury Security which stands for Separate Trading of Registered Interest and Principal of Securities (Refer to Zero Coupon Bonds).

Subject to Extraordinary Redemption
Some municipal bonds are issued with an extraordinary redemption provision which gives the issuer the right to call the bonds under certain circumstances. The circumstances could range from natural disasters to cancelled projects to almost anything else.

T

Tax Status
Municipal bonds are generally free of federal tax, and are generally not subject to alternative minimum tax (AMT). However, some municipal bonds are subject to federal income tax (tax status = "taxable"), and some are subject to AMT (tax status = "Subject to Alt min tax").

Taxable
See tax status.

Taxable Equivalent Yield
The taxable equivalent yield (TEY) is a calculated value that calculates the pre-tax yield an investor would need to get so that after paying tax, the after tax yield would be equal to the tax-free yield on a municipal bond.

Treasury Bills
The U.S. government issues Treasury Bills, Treasury notes, and Treasury bonds. Treasury bills are issued in 3 month, 6 month and 1 year maturities, and they are sold at a discount to par. The bonds do not pay period interest, and the return an investor receives is based on the amount that the purchase price is discounted from par.

Treasury Bonds and Notes
Treasury notes and bonds are issued by the U.S. government in maturities of 2 years, 3 years, 5 years, 10 years and 30 years. They all pay interest semi-annually. The issues that mature in 10 years or less are called notes, and the 30 year issue is called a bond. The most recently issued 30 year bond is called "the long bond".

Type
(Rev or G.O) The interest and principal payments for a municipal bond are typically either guaranteed by the issuer or by the revenue from a specific project. If they are guaranteed by a specific project, the bondholder is relying on revenue from the project to pay principal and interest, and the bonds are known as revenue bonds. If the issuer guarantees the repayment of principal and interest, the bonds are known as a general obligation (often referred to as G.O.) of the issuer.

Y

Yield
See Yield to maturity, yield to call and current yield.

Yield to Call
Some bonds can be called (redeemed) by the issuer on specified dates throughout the life of the bond. Based on the current price of a bond, the yield to all calls should be calculated, and the investor should note the lowest yield to call and the yield to maturity. This will give the investor their worst case scenario.

Yield to Maturity
Yield to maturity is the calculated return on investment that an investor will get if they hold the bond to maturity. It takes into account the present value of all future cash flows, as well as any premium or discount to par that the investor pays.

Z

Zero Coupon Bonds
Zero Coupon Bonds are bonds that do not pay interest during the life of the bond. They are bought at a discount to the maturity value. For example, you might pay $700 today to get back $1,000 in 5 years. The difference between what you pay now and what you receive in the future is your return. Zero Coupon Bonds are similar in concept to savings bonds.