The S&P 500 index has plunged about 12% since Feb. 19 through Friday’s close largely in response to the spreading coronavirus, pulling down many equity-linked exchange traded funds (ETFs) along with it. But a notable number of ETFs have bucked the trend and are outperforming, including those tied to bonds, gold, utilities, and, surprisingly, China,…
Investing can be tricky, even when it comes to so-called “safe” investments such as bonds. When a company issues a bond, the money they receive in return is a loan and must be repaid over time. Many investors choose bonds as long-term investments because they are supposed to guarantee returns on investment in addition to yearly…
What Is a Baby Bond? A baby bond is a fixed income security that is issued in small-dollar denominations, with a by value of less than $1,000. The small denominations enhance the attraction of baby bonds to average retail investors. Key Takeaways A baby bond is one that has a face value of less than…
What is a Bond Rating? A bond rating is a way to measure the creditworthiness of a bond, which corresponds to the cost of borrowing for an issuer. These ratings typically assign a letter grade to bonds that indicates their credit quality. Private independent rating services such as Standard & Poor’s, Moody’s Investors Serviceand Fitch…
What Is A+/A1? A+ /A1 refers to two ratings issued to long-term bonds and bond issuers by the competing credit rating agencies Standard & Poor’s (S&P) and Moody’s respectively. S&P uses A+, and Moody’s uses A1, but both indicate pretty much the same thing. Both A+ and A1 sit squarely in the middle of the…
The Federal Reserve Board’s market risk capital rule (MRR) sets forth the capital requirements for banking organizations with substantial trading activities. The MRR rule requires banks to adjust their capital requirements based on the market risks of their trading positions. The rule applies to banks worldwide with total trading activity of more than 10% of total…
What Is the Net Debt-to-EBITDA Ratio? The net debt-to-EBITDA (earnings before interest depreciation and amortization) ratio is a measurement of leverage, calculated as a company’s interest-bearing liabilities minus cash or cash equivalents, divided by its EBITDA. The net debt-to-EBITDA ratio is a debt ratio that shows how many years it would take for a company…
What Is Murabaha? Murabaha, also referred to as cost-plus financing, is an Islamic financing structure in which the seller and buyer agree to the cost and markup of an asset. The markup takes place of interest, which is illegal in Islamic law. As such, murabaha is not an interest-bearing loan (qardh ribawi) but is an…
Crude oil prices plummeted after Saudi Arabia slashed oil prices by nearly 10% over the weekend in retaliation against Russia for its refusal to join the Organization of the Petroleum Exporting Companies (OPEC) in a large production cut. The move could spark a price war between the two oil producing giants that were previously working…