Terms & Definitions

Definitions

Average credit quality is a calculated average credit rating for an overall portfolio. It is based on the ratings of third-party rating agencies. A credit rating is an assessment of the creditworthiness of a borrower.

Average life is the length of time the principal of a debt issue is expected to be outstanding.

Yield to worst is the lowest potential yield that can be received on a bond without the issuer actually defaulting. 

Distribution yield is a measurement of cash flow paid by an income-paying vehicle. Rather than calculating the yield based on an aggregation of distributions, the most recent distribution is annualized and divided by the net asset value of the security at the time of the payment.

Duration is a measure of the sensitivity of the price of a fixed-income investment to a change in interest rates.

Effective duration is a duration calculation for bonds that have embedded options. This measure of duration takes into account that expected cash flows will fluctuate as interest rates change.

Yield to maturity is the total return anticipated on a bond if the bond is held until it matures and all payments are made as scheduled.