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Reader poll

Yes. The price of crude oil globally is falling so this means the price has to naturally go below $2 at the pump.
52% (163 votes)
No. The oil companies won't let it drop that low.
23% (72 votes)
No. When you take into account the various taxes and duties the price of oil has to drop even further to warrant a sub $2 price at the pump and that is not going to happen.
19% (59 votes)
No. The oil price has bottomed.
6% (19 votes)
Total voters: 313

Will the price of unleaded 91 petrol fall below $2 at the pump?

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Bond Glossary

Posted in Bonds

Here are some of the terms you may come across in this section. If you come across a term which doesn’t appear and you think it would be worth including, let us know here.

Amount The principal amount of this particular bond that has been issued.
Call A call is when the issuer has the right, but not the obligation, to redeem the bonds before the legal maturity date. The call is usually at 100% of the face value plus any accrued interest but this isn't always the case, so it pays to check the documentation.
Conversion date When the bond can be exchanged for ordinary shares (usually) in the issuer. If the bond has a conversion date, it is important to know under what terms and conditions the bond can be converted into shares.
Corporate credit rating This is the credit rating of the issuer and can be higher than the credit rating of the issue itself (see credit rating below). For certain issues, where the issuer is a subsidiary and the credit "health" of the subsidiary depends on the parent, we have used the cerdit rating of the parent.
Coupon A fancy name for the annual rate of return. It is calculated on the principal of the issue, not what you paid for it (see principal and price below). We use it instaed of interest rate to avoid confusion with "yield".  It comes from the time when a bond was a bit of paper with coupons on the side that you presented to get your interest.
Coupon base If the coupon rate changes during the life of the bond, this is the reference rate that the coupon adjusts to. These are typically government bond rates, swap rates or bank bill rates.
Coupon frequency How many times a year interest is paid.
Coupon margin How much the coupon is over the coupon base.
Coupon reset date When the coupon resets at the coupon margin plus the coupon base.
Coupon type There are three types in the NZ market: Fixed (the coupon rate doesn't change for a year); Yearly reset (the coupon changes annually); and Floating (the coupon changes at intervals of less than a year - usually 3 or 6 months).
Credit rating This is the credit rating of the issue and can be different from the issuer rating (e.g. if the issue is subordinated). In NZ usually issued by Standard & Poor's. Click here for an explanation of credit ratings. N/R means the issue is not rated. Note that the credit rating of the issue can be lower than the credit rating of the issuer (see corporate credit rating)
Current coupon The interest rate that the bond is paying now, expressed as an annual rate. For a fixed rate bond this will not change until the next reset dateor election date.
Description A few words to describe what type of bond it is. Click here for a page giving some detail on the types of bonds. Relying on a description alone can be dangerous - you need to look under the hood at the issuing documentation, not just the investment statement but the prospectus as well.
Election date A lot of issues in New Zealand have terms and conditions that allow the issuer at certain times to either offer new terms, pay back the issue in full or swap them for shares. Normally the shares are issued at a small discount to the current market price. They are typically described as "capital bonds" or "capital notes" but others have similar provisions. For issuers they act as a kind of equity, rather than pure debt. [See also legal maturity date below].
Future call dates If an issue is callable, which means that the issuer can redeem the issue before the assumed maturity date, these are the dates after the next call date when the issuer can do this.
Issuer The legal entity that is actually issuing the bonds and assuming the liability to pay interest and principal back. Again it pays to look at the documentation, as often behind the issuer is a guarantor (or guaranteeing group) which also takes on that liability, but there can be subtle differences between the issuer's and guarantor's liabilities.
Issuer type Pretty self explanatory apart from "Trust". This means that the issuer is legally a trustee, but the liability to pay interest and principal is limited to the assets placed in the trust. Usually used for structured credit issue types.
Legal maturity date The absolutely last date that the principal amount has to be repaid. Obviously with a perpetual maturity date, this is never.
Margin reset Certain issues, if not called at a certain date, will have the coupon margin over the coupon base reset at a higher level.
Margin reset conditions What needs to happen for the coupon margin to be reset.
Margin reset date The date at which the coupon margin will be reset.
Maturity date This is the date we use when calculating the yield of a fixed rate maturity. It can be the same or different to the legal maturity date. A number of issues which are either callable or convertible into shares will be priced as if they matured at that call or conversion date, giving a yield to call, using this assumed maturity date.
Minimum holding / increment Issues have a minimum amount that any single investor can hold, rising in minimum increments. Issues that were initially sold to the retail market will typically have minimum holdings of $5,000 or $10,000 with $1,000 increments. Issues that were initially sold to the institutional market, with the exception of banks, will have minimum holdings of $100,000 or $500,000.
Next call date The first date on which the issuer has the option to redeemable the bonds. Depending on the terms of the issue this can either be full or partial redemption. Continuous means the issuer can redeem at any time.
NZDX listing Issues that are initially sold to retail are usually listed on the NZX Debt Market, but they do not have to be.
Price The price is expressed as a percentage of the principal. So if you are buying $5,000 principal and the price is 101.2563%, you will pay $5,062.82. In NZ, the price is a "dirty" price (i.e. it includes accrued interest) so when a bond goes ex-coupon (10 business days before the next coupon date) the price will drop by the amount of interest due. Quite a few bonds in the NZ market, usally the reset, floating rate and some perpetual issues, are traded on price rather than yield .
Principal The principal is the face value of the issue. It is not what you pay for it.
Ranking Ranking, in simple terms, means where you would line up if the issuer went belly up. The first in line would be the senior rank; the next would be subordinated, then what is known as junior subordinated. At the bottom are the shareholders. However, to determine exactly where an issue ranks, especially for preference shares, you need to read the issue documentation carefully.
Senior See ranking
Subordinated See ranking
Structurally subordinated A tricky one this. Sometimes a bond can be described as "senior" in the documentation, but closer inspection reveals that due to the way that the the bond and/or issuer is structured and/or its relationship with related companies, the bonds are subordinate to another type of security.
Swap rates See our explanation here »
Swap spread This the the difference between the yield to maturity/call the an interest rate swap rate of the same maturity. It is given in basis points (100 basis points = 1%). The swap spread, as it is known, is a commonly used measure of relative value. There is no value given if the bond has less than a year to maturity.
YTC - Yield to call For fixed income issues, this is the effective yield per annum, given the price, to the assumed maturity date. It assumes that all the interest you get is reinvested at the same yield. (Yearly reset and floating rate issues are not priced on a yield basis in this market.) Note that some bonds in the NZ market are not traded on yield but on price (see above).
YTM - Yield to maturity For fixed income issues, this is the effective yield per annum, given the price, to the legal maturity date. It assumes that all the interest you get is reinvested at the same yield. (Yearly reset and floating rate issues are not priced on a yield basis in this market.) Note that some bonds in the NZ market are not traded on yield but on price (see above).