Glossary

Short definitions for the terms used across the Feeds pages and articles. For fuller explanations, see Bonds 101 and Inflation 101.

Basis point

One hundredth of a percentage point (0.01%). Rate moves are usually described in basis points because the changes are often small — a jump from 4.25% to 4.50% is "25 basis points."

Bid-to-cover ratio

At a bond auction, this is the total amount investors bid for divided by the amount the government actually offered. A ratio of 2.5 means investors wanted to buy two and a half times more than was on offer. Higher generally signals stronger demand; a weak ratio is often read as a warning sign. See Bond Auctions.

Breakeven inflation

The market-implied inflation forecast derived from comparing regular Treasury yields to inflation-protected Treasury (TIPS) yields of the same maturity. See Inflation 101.

Central bank policy rate

The core interest rate a central bank sets, which influences borrowing costs throughout that country's economy — everything from mortgages to business loans tends to move in the same direction over time. See Central Banking.

Coupon

The fixed interest payment a bond pays its holder, usually expressed as an annual percentage of the bond's face value. Distinct from yield, which reflects the bond's current market price rather than its original terms.

CPI (Consumer Price Index)

The most commonly cited measure of inflation, tracking the price of a fixed basket of consumer goods and services over time. See Inflation 101.

Debt-to-GDP ratio

A country's total government debt expressed as a percentage of its annual economic output (GDP). Used to compare debt burdens across countries of very different sizes. See Debt by Country.

Maturity

The date on which a bond's face value is repaid in full to whoever holds it. Bonds are often referred to by their maturity — a "10-year Treasury" matures ten years after issuance.

Quantitative easing (QE)

A policy where a central bank buys large quantities of government bonds (or other assets) to push more money into the financial system and hold longer-term interest rates down, typically used when short-term policy rates are already near zero.

Sovereign default

When a national government fails to make a scheduled debt payment in full or on time. Defaults can be outright (missed payments) or "soft" (restructuring debt on worse terms for lenders than originally agreed).

Treasury auction

The process by which a government sells new bonds to investors. Results — yields, bid-to-cover ratio, size — are a real-time read on investor appetite for that government's debt. See Bond Auctions.

Yield

The effective annual return an investor earns from holding a bond, accounting for its price, coupon, and time to maturity. Moves opposite to price: yields rise when bond prices fall. See Bonds 101.

Yield curve

A chart or table lining up bond yields by maturity (2-year, 10-year, 30-year, etc.). Its shape is widely watched as a signal of investor expectations about future growth and inflation. See Feeds.