Term Definition
Bond A loan, usually taken out by a government or company, which normally pays a fixed rate of interest over a given time period, at the end of which the loan is repaid.
Corporate bond Bonds issued by a company. They can offer higher interest payments than bonds issued by governments as they are often considered more risky.
Government bond Bonds issued by governments.
Gross Domestic Product The value of all finished goods and services produced within a country's borders, over a specified period of time. GDP is generally expressed as an annual figure.
Index-linked bond Bonds where both the value of the loan and the interest payments are adjusted in line with inflation until they mature. Also referred to as inflation-linked bonds.
Inflation The rate of increase in the cost of living. Inflation is usually quoted as an annual percentage, comparing the average price this month with the same month a year earlier. There are two inflation indices in the UK – the Retail Prices Index (RPI) and the Consumer Prices Index (CPI).
Macroeconomic Refers to the performance and behaviour of an economy at the regional or national level. Macroeconomic factors such as economic output, unemployment, inflation and investment are key indicators of economic performance. Sometimes abbreviated to 'macro'.
Maturity The date at which a loan or bond is contracted to be repaid (also known as redemption).
Monetary policy A central bank's regulation of money in circulation and interest rates.
Real yield The yield on an investment, adjusted for changes in prices in an economy.
Risk premia The difference between the return from a risk-free asset, such as a high-quality government bond or cash, and the return from an investment in any other asset. The risk premium can be considered the 'price' or 'pay-off' for taking on increased risk. A higher risk premium implies higher risk.
Valuations The worth of an asset or company based on its current price.