Home Site Map
Glossary D PDF Print E-mail

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

dated date (or issue date)

The date of a bond issue from which the bondholder is entitled to receive interest, even though the bonds may actually be sold or delivered at some other date.

daycount

The convention used to calculate the number of days in an interest payment period. A 30/360 convention assumes 30 days in a month and 360 days in a year. An actual/360 convention assumes the actual number of days in the given month and 360 days in the year. An actual/ actual convention uses the actual number of days in the given interest period and year.

dealer

A securities firm or department of a commercial bank that engages in the underwriting, trading and sale of municipal (or other) securities.

dealer bank

Department of commercial bank that engages in the underwriting, trading and sale of municipal (or other) securities.

debenture

Unsecured debt obligation, issued against the general credit of a corporation, rather than against a specific asset.

debt limit

Statutory or constitutional limit on the principal amount of debt that an issuer may incur (or that it may have outstanding at any one time).

debt service

Principal and interest.

debt service coverage

The ratio of net revenues to the debt service requirements.

debt service requirements

Amounts required to pay debt service, often expressed in the context of a time frame (such as “annual debt service requirements”).

debt service reserve fund

The fund into which are paid monies which are required by the trust agreement or indenture as a reserve against a temporary interruption in the receipt of the revenues or other amounts which are pledged for the payment of the bonds. A common deposit requirement for a “debt service reserve fund” is six months or one-year’s debt service on the bonds. The “debt service reserve fund” may be initially funded out of bond proceeds, over a period of time from revenues, or by a combination of the above.

deep discount

A discount greater than traditional market discounts of 3%.

default

Failure to pay principal or interest when due. Defaults can also occur for failure to meet nonpayment obligations, such as reporting requirements, or when a material problem occurs for the issuer, such as a bankruptcy.

default risk

Possibility that a bond issuer will fail to pay principal or interest when due.

defeasance

Termination of the rights and interests of the trustee and bondholders under a trust agreement or indenture upon final payment or provision for payment of all debt service and premiums, and other costs, as specifically provided for in the trust instrument.

denomination

The face amount, or par value, of a bond or note that the issuer promises to pay on the maturity date. Most municipal bonds are issued in a minimum denomination of $5,000.

derivative

A financial product that derives its value from an underlying security. In the tax-exempt market, there are primary and secondary derivative products.

discos

Agency bond no-coupon discount notes (“discos”) issued by federal agencies to meet short-term financing needs that are issued at a discount to par value. Investors who sell such discos prior to maturity may lose money.

discount

(1) Amount (stated in dollars or a percent) by which the selling or purchase price of a security is less than its face amount; (2) Amount by which the amount bid for an issue is less than the aggregate principal amount of that issue.

discount bond

A bond sold at less than par.

discount margin

The effective spread to maturity of a floating-rate security after discounting the yield value of a price other than par over the life of the security.

discount note

Short-term obligations issued at discount from face value, with maturities ranging from overnight to 360 days. They have no periodic interest payments; the investor receives the note’s face value at maturity.

discount rate

The rate the Federal Reserve charges on loans to member banks.

distribution of principal

Return of principal to unit trust shareholders, usually when a bond in the portfolio reaches maturity, is called or, if necessary, is sold prior to maturity.

divided account

Account structure that is divided as to liability, and not as to sales. Also called “Western” account.

dollar bond

A bond that is quoted and traded in dollar prices rather than in terms of yield.

double and triple tax-exemption

Securities that are exempt from state and local as well as federal income taxes are said to have double or triple tax-exemption.

double-barreled bond

A bond is said to be “double-barreled” when it is secured by the pledge of two (or more) sources of payment. In some states a bond secured in the first instance by a user charge, e.g., water or sewer, may be additionally secured by ad valorem taxes if the user charges don't bring enough revenue.

double exemption

Securities that are exempt from state as well as federal income taxes are said to have “double exemption.” In states where this exemption occurs, the exemption is usually only for bonds issued by the state or its local governments. An exception to this rule is the bond debt of U.S. territories such as Guam. Debt of Puerto Rico is also double exempt.

downgrade risk

Possibility that a bond’s rating will be lowered because the issuer’s financial condition, or the financial condition of a party to the financial transaction, deteriorates.

duration

The weighted maturity of a fixed-income investment’s cash flows, used in the estimation of the price sensitivity of fixed-income securities for a given change in interest rates.

Last Updated on Wednesday, 09 June 2010 07:15