Monday, December 3, 2007

Break the buck

Term for a money market portfolio which losses money. The term stems from the fact that money markets are always priced at $1/share, so if the net asset value falls below $1, (breaks the buck) the fund has lost money.

Tuesday, November 27, 2007

CDO^2 (CDO Squared)

A CDO which has other CDO's as collateral.

Thursday, November 15, 2007

Lift

To purchase a bond at its offered price, especially without bidding back.

E.g. "I got lifted on 10mm GNR 2006-14 A at E+20."

This means that the trader had owned $10 million of this GNMA CMO, and sold it to an investor at a spread to the Eurodollar curve of 20bps.

Prop desk

Term for traders who use a dealer firm's capital to try to make profit for the firm. This is different than traders who work to fill customer orders (sometimes called "trading the flow"). A prop trader acts more like a hedge fund, where as flow traders are really more like wholesalers who buy bonds, mark the up a little, and then sell them. Its possible that bond salespeople may use the prop desk's positions as inventory, but that is not its primary purpose.

Tuesday, November 13, 2007

Crossover

Term for a bond rated below investment grade by one rating agency but investment grade by another.

6 B

Term for a bond rated Baa/BBB.

Under

Short for underlying. Often bonds sold with insurance also are given a rating as if there were no insurance. This is called the underlying rating.

E.g. The bond is rated AAA MBIA with a AA under.

Translation: The bond is rated AAA because of MBIA insurance and would have been rated AA without the insurance.