See the glossary of frequently used terms for definitions.
Bloomberg U.S. High-Yield Municipal Bond Index is an unmanaged index that measures the performance of the high-yield municipal bond market. The US Treasury Index an index based on recent auctions of U.S. Treasury bills and is commonly used as a benchmark for determining interest rates, such as mortgage rates. The S&P 500 Index Measures the performance of the US stock market as a whole. Bloomberg U.S. Aggregate Bond Index is a broad-based benchmark that measures the market for investment-grade, U.S. dollar-denominated, taxable bonds at a fixed rate. The indexes are unmanaged and their returns involve reinvestment of dividends and do not reflect fees or expenses. It is not possible to invest directly in an index.
The portfolio is actively managed and current information is subject to change. The sectors or positions discussed should not be considered recommendations to buy or sell any security.
Glossary of frequently used terms
Advanced Refinancing Bond (generally applies only to municipal bond funds) – A bond issued to cancel or redeem early another bond outstanding more than 90 days before the maturity date of the original bond.
Base point – A unit of measurement used to describe the percentage change in the value or rate of a financial instrument. One basis point equals 0.01% (1/100 of a percentage) or 0.0001 in decimal form. In most cases, it refers to changes in interest rates and bond yields.
Beta- measures the sensitivity of an investment to market movements relative to an index. A beta of 1 indicates that the security's price has moved with the market. A beta of less than 1 means that the security has been less volatile than the market. A beta of more than 1 indicates that the security's price has been more volatile than the market.
Break even point(s) – The difference(s) between the yield of a nominal bond and an inflation-indexed bond of the same maturity.
Carry– The cost or benefit of owning that asset.
Correlation – The degree to which asset or asset class prices have moved relative to each other. Correlation ranges from -1 (they always move in opposite directions) through 0 (absolutely independent) to 1 (they always move together).
Credit spreads (or spreads) – The differences in yield between Treasury bonds and other types of fixed-income securities with similar maturities. Credit risk transfer securities– Securities that transfer a portion of the risk associated with credit losses within the conventional residential mortgage loan pools of the government-sponsored entities (GSEs), Fannie Mae and Freddie Mac, to the private sector.
Dot plot – The Federal Reserve “dot” plot/projection is a quarterly chart that summarizes the outlook for the federal funds rate for each of the FOMC members. Duration – A measure of the sensitivity of the price (the value of the principal) of a fixed-income investment to a change in interest rates, expressed in number of years.
Dividend Yield – Refers to a stock's annual dividend payments to shareholders, expressed as a percentage of the stock's current price. Excess returns – They represent the investment return generated by a security or portfolio that exceeds the “risk-free” return of a security generally perceived by the market as risk-free, such as a certificate of deposit or a bond issued by a government.
Goldilocks – An economy that is neither too hot nor too cold, that is, one that sustains moderate economic growth, and that has low inflation, allowing for market-friendly monetary policy.
Coverage– An investment used to help reduce the risk of adverse price movements in an asset. Typically, a hedge involves taking an offsetting position in a related security to help protect against a sudden change in price, such as purchasing a “put” or “call” option contract on a stock in which the investor already owns shares.
Insurance-linked securities – Investments sponsored by property and casualty insurers to help mitigate the risk of having to pay claims following natural disasters.
Liquidity premium‒ Any form of additional compensation required to encourage investment in assets that cannot be easily and efficiently converted into cash at fair market value.
Interest rate coverage ratio‒ Debt-to-profitability ratio used to determine how easily a company can pay the interest on its outstanding debt. Loan spread – Interest rates higher than LIBOR that banks charge borrowers.
Loan-to-value ratio (LTV)‒ A measure that compares the amount of a mortgage to the appraised value of the property. The higher the down payment, the lower the LTV ratio.
Municipal/Treasury Bond Yield Ratio (municipal bond funds only) – Measure of the valuation of municipal bonds. The higher the ratio of municipal bonds to Treasury bonds, the more attractive municipal bonds are relative to Treasury bonds.
Market value ‒ It involves recording the price or value of a security, portfolio, or account to reflect the current market value rather than the book value.
Prepayment risk – The risk involved in the early repayment of the principal of a fixed-income security. When the principal is repaid early, future interest will not be paid on that portion of the principal.
Actual performance – The return an investment provides after taking inflation into account.
Reinsurance — coverage provided to insurance companies.
Online rate – The premium/coupon paid by the reinsurance company for coverage.
Standard deviation – A statistical measure of a portfolio's historical volatility; a lower standard deviation indicates lower historical volatility. Sharpe ratio – A measure of risk-adjusted return that describes how much excess return an investor receives in exchange for the volatility of holding a riskier asset.
Expansion sectors ‒ Sectors of the non-government fixed-income market that offer higher returns, with greater risk, than government investments.
Tail risk – The additional risk that an asset or portfolio of assets will move more than 3 standard deviations from the current price, in addition to the risk of a normal distribution.
Tax-equivalent yield ‒ The pre-tax yield that a taxable bond must have for its yield to equal that of a tax-free municipal bond. Subordinated capital/financing – Financing ranked behind that held by secured lenders in the order of repayment. Subordinated financing may be a combination of debt and equity instruments. Equity components may include options and warrants. Debt components may include asset-backed securities.
Yield Curve (Curve)- A yield curve is a line that plots the interest rates, at a given point in time, of bonds that have the same credit quality but different maturity dates.
Yield to maturity – The anticipated total return of a bond if it is held to the end of its useful life.
Performance at Worst (YTW) – The lowest potential yield that can be received on a bond without the issuer defaulting.
The views expressed are those of Amundi US and are current as of June 30, 2024. These views are subject to change at any time based on market or other conditions and Amundi US assumes no responsibility to update such views. These views cannot be considered investment advice and, as investment decisions for the strategies are based on many factors, they cannot be considered as an indication of intent to trade on behalf of any strategy or portfolio.
A word about risk
Market prices of securities may rise or fall, sometimes rapidly or unpredictably, due to general market conditions, such as actual or perceived adverse economic, political or regulatory conditions, recessions, inflation, changes in interest or currency rates, illiquidity in bond markets, spread of infectious diseases or other public health problems or adverse investor sentiment. Investments in high-yield or lower-rated securities are subject to greater than average price volatility, illiquidity and the possibility of default. The market price of securities may fluctuate when interest rates change. When interest rates rise, prices of the Fund's fixed-income securities generally fall. Conversely, when interest rates fall, prices of the Fund's fixed-income securities generally rise. Investments in the Fund are subject to possible losses due to the financial failure of the issuers of the underlying securities and their inability to meet their debt obligations. Prepayment risk is the possibility that an issuer may exercise its right to prepay its security, if falling interest rates prompt it to do so. By being forced to reinvest unanticipated proceeds at lower interest rates, the Fund would experience a decrease in income and lose the opportunity for further price appreciation. The value of municipal securities may be adversely affected by changes in the financial condition of municipal issuers, lower income, and regulatory and political developments. A portion of income may be subject to local, state, federal and/or alternative minimum taxes. Capital gains, if any, are subject to a capital gains tax. The Fund may use derivatives, which can have a potentially material impact on the Fund's performance.
Before investing, consider the investment objectives, risks, charges and expenses of the product. Please contact your financial advisor or Amundi Asset Management US for a prospectus or summary prospectus containing this information. Please read it carefully.
Individuals are advised to seek advice from their financial, legal, tax and other professionals before making any financial or investment decision or purchasing any financial, securities or investment-related product or service, including any product or service described in these materials. Amundi US does not provide investment advice or recommendations.
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