Fixed Income Glossary

call privilege

For a bond, it permits the issuing firm to redeeem the bond before the scheduled maturity under certain conditions. The US government no longer issues bonds that have a call privilege.

coupon rate

The interest rate that the issuer must pay the bondholders during the term of the bond.

indenture

The legal document that sets forth all the parameters of the agreement between bondholders and the issuer. These include interest rate, the frequency of payments, the currency and the bond’s par value.

LIBOR

The London Interbank Offered Rate (LIBOR) was a benchmark interest rate at which major global banks lend to one another in the internal interbank market for short-term loans. The LIBOR was phased out on 30 Jun 2023 and replaced by the Secured Overnight Finance Rate (SOFR).

term-to-maturity

The number of years during which the borrower has promised to meet the conditions of the debt (contained in the bond’s indenture). This term is often used synonymously with maturity and term.