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AGGY: Thinking Outside the Agg Box
Baa: Moody’s credit rating that implies the borrower has capacity to meet financial commitments, but may be more vulnerable to adverse economic conditions. This rating includes the lowest level of credit risk while still being investment-grade.
Brexit: an abbreviation of “British exit” that mirrors the term Grexit. It refers to the possibility that Britain will withdraw from the European Union
Credit: A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future.
Duration: A measure of a bond’s sensitivity to changes in interest rates. The weighted average accounts for the various durations of the bonds purchased as well as the proportion of the total government bond portfolio that they make up.
Interest Rate Differentials: The Difference between the 2 Year interest rate swaps of the United Kingdom vs. the United States
Interest rate risk: The risk that an investment’s value will decline due to an increase in interest rates.
Investment Grade: A rating given to a municipal or corporate bond. It is a relatively favorable rating by either Moody’s or Standard & Poor’s indicating a higher chance an issuer performs interest and principal obligations as promised by the terms of the debt issuance.
Safe-haven: Characterized by being a potentially desirable focal point of investment flows during periods of increased volatility and market risk. Safe-haven is not synonymous with risk-free.
Treasury yield: The return on investment, expressed as a percentage, on the debt obligations of the U.S. government.
Yield: The income return on an investment. Refers to the interest or dividends received from a security that is typically expressed annually as a percentage of the market or face value.