Basis point (BP)

1/100th of 1%, i.e. 0.01%

Base rate

Minimum lending rate of a bank or financial institution in the UK.


A measure against which the investment policy or performance of a fund manager can be compared.

Bill of Exchange

A non-interest-bearing written order used primarily in international trade that binds one party to pay a fixed sum of money to another party at a predetermined future date. 

Callable Deposit

A deposit placed with a bank or building society at a set rate for a set amount of time.  However, the borrower has the right to repay the funds on pre agreed dates, before maturity.  This decision is based on how market rates have moved since the deal was agreed.  If rates have fallen the likelihood of the deposit being repaid rises, as cheaper money can be found by the borrower.

[Cash] Fund Management

Fund management is the management of an investment portfolio of cash on behalf of a private client or an institution, the receipts and distribution of dividends and interest, and all other administrative work in connection with the portfolio.

Certificate of Deposit (CD)

Evidence of a deposit with a specified bank or building society repayable on a fixed date.  They are negotiable instruments and have a secondary market; therefore the holder of a CD is able to sell it to a third party before the maturity of the CD.

Commercial Paper

Short-term obligations with maturities ranging from 2 to 270 days issued by banks, corporations and other borrowers.  Such instruments are unsecured and usually discounted, although some may be interest bearing.

Corporate Bond

Strictly speaking, corporate bonds are those issued by companies.  However, the term is used to cover all bonds other than those issued by governments in their own currencies and includes issues by companies, supranational organisations and government agencies.


Another (or the other) party to an agreement or other market contract (e.g. lender/borrower/writer of a swap/etc.)

Credit Default Swap (CDS)

A swap designed to transfer the credit exposure of fixed income products between parties.  The buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product.  By doing this, the risk of default is transferred from the holder of the fixed income security to the seller of the swap.

Capital Financing Requirement (CFR)

The amount the council has to borrow to fund its capital commitments.


Chartered Institute of Public Finance and Accountancy.


[Department for] Communities and Local Government.


A contract whose value is based on the performance of an underlying financial asset, index or other investment, e.g. an option is a derivative because its value changes in relation to the performance of an underlying stock.

Debt Management Account Deposit Facility (DMADF)

Deposit Account offered by the Debt Management Office, guaranteed by the UK government

European Central Bank (ECB)

European Central Bank – sets the central interest rates in the EMU area.  The ECB determines the targets itself for its interest rate setting policy; this is the keep inflation within a band of 0 to 2%.  It does not accept that monetary policy is to be used to manage fluctuations in unemployment and growth caused by the business cycle.

European and Monetary Union (EMU)

The Economic and Monetary Union (EMU) is an umbrella term for the group of policies aimed at converging the economies of all member states of the European Union.


A share in a company with limited liability.  It generally enables the holder to share in the profitability of the company through dividend payments and capital appreciation.  Equity values can decrease as well as increase.

Forward Deal

The act of agreeing today to deposit funds with an institution for an agreed time limit, on an agreed future date, at an agreed rate.

Forward Deposits

Same as forward dealing (above).

Fiscal Policy

The government policy on taxation and welfare payments.


Gross Domestic Product.

[UK] Gilt

Registered UK government securities giving the investor an absolute commitment from the government to honour the debt that those securities represent.


London inter-bank bid rate (phased out in December 2021)


London inter-bank offered rate (phased out in December 2021)

Money Market Fund

A well rated, highly diversified pooled investment vehicle whose assets mainly comprise of short-term instruments.  It is very similar to a unit trust, however in a MMF.

Monetary Policy Committee (MPC)

Government body that sets the bank rate (commonly referred to as being base rate).  Their primary target is to keep inflation within plus or minus 1% of a central target of 2% in two years time from the date of the monthly meeting of the committee.  Their secondary target is to support the government in maintaining high and stable levels of growth and employment.

Other Bond Funds

Pooled funds investing in a wide range of bonds.


Public Works Loan Board.


Quantitative Easing.

Retail Price Index

Measurement of the monthly change in the average level of prices at the retail level weighted by the average expenditure pattern of the average person.


Sterling Overnight Index Average (SONIA) is the effective interest rate paid by banks for unsecured transactions in the UK sterling market. The rate is published by the Bank of England.

Sovereign Issues (excl UK Gilts)

Bonds issued or guaranteed by nation states, but excluding UK government bonds.

Supranational Bonds

Bonds issued by supranational bodies, e.g. European Investment Bank.  The bonds – also known as Multilateral Development Bank bonds – are generally AAA rated and behave similarly to gilts, but pay a higher yield (“spread”) given their relative illiquidity when compared with gilts.

Treasury Bill

Treasury bills are short-term debt instruments issued by the UK or other governments.  They provide a return to the investor by virtue of being issued at a discount to their final redemption value.