finance glossary

Glossary

Alphabetized reference terms for fast market reading and review.

Commodities

Basis risk: Risk that the spread between a hedged asset and its hedge moves unexpectedly.
Calendar spread: Price difference between futures of the same commodity with different maturities.
Commodity sensitivity: How growth data affects commodity prices.
Contango: Futures prices above spot, often reflecting storage and financing costs.
Demand signal: Fresh evidence on consumption or inventories that shifts commodity pricing.
Real Assets: Physical or commodity-linked assets that hedge inflation risk.
Real-asset bid: Investor preference for commodities and tangible assets.

Credit

AT1 wipeout: Subordinated bondholders taking zero in the deal structure.
Capital-spread repricing: AT1 markets widening as hierarchy fears grow.
CDS: Credit default swap; insurance-like contract against default.
Credit quality: The health of loan books and default risk.
Credit widening: Spreads rising on weaker risk appetite.
Fallen angel: Bond downgraded from investment grade to high yield.
Prime broker risk controls: Scrutiny of margin and concentration limits.
Regional contagion risk: Stress spreading to peer bank stocks.
Shotgun bank merger: UBS absorbing Credit Suisse under regulator pressure.
Sovereign downgrade to AA+: Fitch citing debt standoffs and rising burdens.
Spread widening: Credit yields rise relative to Treasuries, indicating higher perceived risk.
Total-return swap leverage: Synthetic exposure that masked position size.

Energy

Backwardation: Spot above futures, signaling tight prompt supply.
Core PCE: The Fed's preferred inflation gauge excluding food and energy.
Crack spread: Refining margin between crude input and fuel outputs.
Gas-to-oil switching: Power generators shift from gas to oil when gas prices spike.
Inventory-driven oil slip: Crude easing on stock builds even without new fund shorts.
Oil above $100: Crude spiking on invasion-driven supply fears.
OPEC+ slow-walk supply: Gradual output hikes despite a tight market.
Strategic reserve talk: Governments weighing releases to cap prices.
Supply chatter: Unconfirmed news that can move commodities.
Supply headline: News about production that can move commodities.
Supply-shock oil bid: Drone strikes tightening near-term crude availability.
Underinvestment squeeze: Thin spare capacity keeping prices jumpy into winter.

Equities

ADP payrolls: A private-sector employment estimate released ahead of NFP.
Breadth: The number of stocks participating in a move.
Cyclical leadership: Outperformance from sectors tied to growth.
Defensive bid: Investor preference for stable, low-beta sectors.
Defensive posture: Preference for lower-risk exposures.
Defensive rotation trigger: Hot data could send flows back into safe assets.
Earnings breadth: How many sectors participate in earnings strength.
ECM thaw watch: Success boosting hopes for Instacart and Klaviyo.
ETF purchase halt: Ending equity-buying support alongside normalization.
Factor rotation: Flows shift between style factors like growth, value, momentum, and quality.
Family office transparency: Calls for clearer disclosure of private leverage.
Fee war kickoff: Issuers slashing costs to win early assets.
First-day 25% pop: Debut rally as investors test risk appetite.
Flow distortion: Price moves amplified by technical positioning.
Forced block unwinds: Banks dumping concentrated media and tech stakes.
Futures-to-spot rotation: Investors shifting from futures products and trusts.
Growth leadership: Market direction led by high-growth sectors.
High beta: Stocks that move more than the market, amplifying upside and downside.
Leadership breadth: How broadly market leadership extends across sectors and factors.
Market Breadth Divergence: Index gains driven by a narrowing subset of constituents.
Multiple expansion: Stock prices rise faster than earnings, lifting valuation multiples.
Policy event: A central bank decision that can move markets.
Policy pushback: Central bank messaging aimed at tempering market bets.
Policy shock: A market move driven by central bank messaging.
Range-Bound: Trading within a tight band without a clear trend.
Rate-sensitive valuations: Long-end yields influencing tech multiples.
Rotation: A shift of capital between sectors as risk appetite changes.
Sector rotation to energy: Flows leaving megacap tech for real-asset plays.
Services surprise: Data print above consensus for the services sector.
Small-cap leadership: Outperformance from smaller, more cyclical stocks.
Spot ETF approval: SEC greenlighting exchange-traded bitcoin funds.
Structural Rotation: A durable shift in market leadership driven by fundamentals rather than short-term flows.
Top-of-range pricing: IPO set at $51 valuing Arm above $54B.
Value tilt: Portfolio bias toward cheaper, cash-generating stocks.
Vol-Control Strategies: Systematic funds that cut equity exposure as realized volatility rises.
Wage moderation: Slower pay growth that eases inflation pressure.
Wage sensitivity: Market focus on pay growth as an inflation signal.

FX

Carry trade: Borrow low-yielding currency to fund longs in higher-yielders.
Dollar bid: Greenback strengthening on hawkish repricing.
Dollar smile: USD strengthens in stress and strong U.S. growth; weakens in stable global expansions.
Dollar Strength: A rising U.S. dollar that pressures gold and EM assets.
Dollar Weakness: A decline in USD value that boosts commodities and EM assets.
EM FX: Emerging market currencies.
EM tightening: Pressure on emerging markets from a stronger dollar.
Financial conditions: The combined effect of rates, credit, and FX on the economy.
Flow-driven dollar bid: USD strength fueled by liquidity flows more than macro shifts.
FX fixing: A daily benchmark rate used for index and corporate flows.
Haven Demand: Safe-haven buying that lifts the dollar when risk assets wobble.
Mild dollar softness: USD easing slightly amid cautious positioning.
Safe-haven bid: Flow into perceived stable currencies when risk assets sell off.
Softer USD tailwind: A weaker dollar amplifying commodity strength globally.
Sterling slide: Currency punished alongside the gilt selloff.
Yen firming drift: Currency strengthening as rate differentials narrow.

Geopolitics

Risk premium: Extra return investors demand to hold assets exposed to geopolitical shocks.
Risk-off: Investor shift toward safety and away from high beta assets.
Sanctions premium: Pricing risk of restricted Russian commodities and banks.
Sanctions risk: Possibility that trade or financial restrictions disrupt assets or flows.
Supply-chain reroute: Shifting trade routes to avoid conflict zones or restricted regions.

Liquidity

Bank run spiral: Tens of billions in deposits fleeing in a day.
Bid-ask spread: Gap between buy and sell quotes; widens when liquidity thins.
Flow-driven tape: Price action dominated by positioning rather than new data.
Hedging Flow: Capital moving into protective assets during uncertainty.
Holiday liquidity drift: Markets moving in a narrow band into year-end.
Holiday reopen: The first full session after a market closure, often with thin liquidity.
Holiday week: Sessions with reduced participation and liquidity.
LDI collateral squeeze: Pension hedges strained by 100 bp yield spikes.
Liquidity Air Pocket: Thin order-book stretch where prices gap quickly.
Liquidity backstop wall: SNB providing over CHF 100B to steady funding.
Liquidity rebound: A bounce driven by thin trading rather than fundamentals.
Liquidity Vacuum: Periods when thin participation can produce outsized moves.
Market depth: Volume available at quoted prices without moving the market.
Positioning light: Low exposure that can magnify reactions.
Positioning signal: Price moves driven by existing exposure rather than new news.
Range trade: Markets moving within a defined band.
Rebalancing flows: Portfolio adjustments that can move markets around month-end.
Reopening bid: Fresh flows that hit markets at the start of a new period.
Risk-on flows: Capital moving into higher beta assets.
Slippage: Execution price deviates from the intended price due to market impact.
Thin trade: Low volume sessions with limited liquidity.
Weekend drift: Slow price changes in thin trading conditions.
Weekend gap risk: Potential for jumps when liquidity returns.
Weekend signal: Low-liquidity moves that need confirmation.
Window dressing: Buying to make portfolios look better at reporting dates.
Year-End Positioning: Adjustments made for reporting or risk limits rather than new views.

Macro

6.2% headline shock: Inflation at a three-decade high.
Ballast: Holdings used to steady a portfolio during volatility.
Consensus print: An economic release that lands close to market expectations.
Constructive tone: A market mood that is positive but cautious.
Conviction: Strength of investor commitment to a direction.
Core services: Inflation in services excluding housing, a Fed focus.
CPI: Consumer price index, a key inflation gauge.
Data cycle: The sequence of key economic releases in a given period.
Data dependence: Policy guidance tied to incoming economic data.
Data-dependent: Markets waiting on incoming economic releases.
Data-pause positioning: Markets idling ahead of the jobs report before taking direction.
Data-watch posture: Traders waiting for December prints before taking risk.
De-risking: Reducing exposure to lock in gains or limit drawdowns.
Diffusion index: Survey metric where readings above 50 show expansion and below 50 show contraction.
Disinflation signal: Slower shelter and goods prices pulling CPI below forecasts.
Earnings catalyst: Company results that can shift market direction.
Energy-driven inflation: Higher fuel costs complicating central bank tightening.
Event risk: Potential for sharp moves around major announcements.
Futures Indication: Pricing from derivatives that offers a hint, not a full signal.
Growth-cooling rationale: Slower activity used to justify easing.
Guidance risk: Earnings outlook that can shift valuations.
Holding pattern: Markets moving sideways ahead of an event.
Holiday Closure: A session where major cash markets are closed, reducing price discovery.
Holiday pause: Trading conditions with reduced participation.
Inventory build: Rising stockpiles that can pressure prices.
Jobless claims: Weekly filings for unemployment benefits.
Macro Anchor: Real assets (energy, commodities, infrastructure) that stabilize portfolios during policy or geopolitical uncertainty.
Macro calendar: The schedule of key economic releases.
Mean reversion: Price action snapping back after a sharp move.
Melt-Up vs Controlled Reset: A two-path market dynamic that oscillates between euphoric rally and orderly correction.
Month-end rebalance: Portfolio adjustments at the end of the month.
Month-to-Date Lows: Lowest level seen so far in the current month.
NFP: The monthly US employment report outside agriculture.
Output gap: Difference between actual GDP and potential GDP.
PMI: Purchasing managers index, a gauge of business activity.
PPI: Producer price index, measuring inflation at the wholesale level.
Pre-NFP pause: Markets holding steady ahead of the payrolls report.
Price discovery: Markets finding a level through active trading.
Pricing power: Ability to raise prices without losing demand.
Recalibration: A reset in market expectations after a key data release.
Relief bid: Buying that follows a less hawkish outcome.
Repricing: Markets adjusting expectations after new information.
Retail sales: Monthly measure of consumer spending.
Risk barometer: An asset used to gauge overall sentiment.
Risk neutral: A market tone without strong directional bias.
Risk rally reaction: Equities jumping and the dollar weakening on the tone.
Sentiment check: Short-term price action used to gauge mood.
Sentiment probe: Short-term price action used as a mood check rather than a signal.
Services inflation watch: Council focused on wage and service pressures.
Soft landing: Inflation cools without a sharp rise in unemployment or a recession.
Stabilization: Markets settling after a volatile period.
Sunday open: The first futures trading session of the week.
Two-way trade: Markets moving up and down without a clear trend.
Unfunded mini-budget: Tax cuts without offsets jolting gilt markets.
Year-end rebalance: Shifting allocations to meet target weights or reporting needs.

Options

Crypto beta: Crypto acting as a high-volatility proxy for risk sentiment.
Dealer Gamma: Net option position of dealers that can dampen or amplify price moves.
Gamma effects: Dealer hedging flows that influence price action.
Gamma squeeze: Dealer hedging on short calls forces buying, driving the underlying up.
Opex: Options expiration that can intensify short-term moves.
Skew: Relative pricing of out-of-the-money puts versus calls.
Speech-driven volatility: Markets parsing language for pause timing.
Vega bleed: Loss in option value as implied volatility drifts lower over time.
Volatility compression: Options pricing that reflects low expected swings.
Volatility uptick: Rising expected price swings.
Volatility whipsaws: Price swings as inflows meet profit-taking.

Rates

2024 cut path: Futures already penciling in next-year easing despite hawkish optionality.
5.25–5.50% terminal band: Policy rate after July’s 25 bp move.
5% yield milestone: The 10-year briefly topping a 16-year high.
Accelerated taper risk: Pressure on the Fed to speed asset-purchase runoff.
Auction strength: High demand that lowers yields.
Auction tail: A bond auction clearing at a higher yield than expected.
Auction takedown watch: Monitoring demand quality as term premia drift.
Bear steepening: Yields rise, with long rates rising faster than short rates.
Bill-issuance surge: Heavier Treasury supply hitting the market post-ceiling.
BoE rescue buying: Temporary purchases to stabilize long-end yields.
Breakevens: Market-implied inflation expectations from TIPS.
Bull flattening: Long yields fall faster than short yields, flattening the curve.
Bull steepener: Long-end yields fall faster than the front end, steepening the curve in a rally.
Credit spread: The yield premium for credit risk over Treasuries.
Curve flattening: Front-end repricing faster than long yields on growth worries.
Curve inversion: Short-term yields exceed long-term yields, often seen as a recession warning.
Curve steepening: Long yields rising relative to short yields.
Curve-flattening recession tell: Growth fears showing up as long yields lag.
Cut pricing pull-forward: Futures moving 2024 easing expectations closer.
Data-dependent stance: Fed willing to hike again only if inflation progress stalls.
Dot-plot jump to 3.4%: Year-end rate projections reset sharply higher.
Downshift to 50 bps: Ending the string of 75 bp hikes.
Duration bid: Strong demand for longer-dated bonds.
Duration compression: Valuation pressure on assets sensitive to rates.
Duration demand: Investor appetite for longer-maturity bonds at prevailing yields.
Duration mismatch losses: Long-dated Treasuries eroding capital as rates rose.
Duration risk: Sensitivity of asset prices to changes in yields.
Earlier liftoff pricing: Futures pulling 2022 hikes forward.
Fed path repricing: Markets yanking near-term hikes after the failure.
Fed pushback: Guidance aimed at cooling rate-cut expectations.
First cut to 3.75%: ECB trimming the deposit rate after its hike cycle.
Front-end hawkish pricing: Markets still baking in aggressive summer hikes.
Front-end repricing: Short-term yields moving on policy expectations.
Front-end shock: Short-term yields moving sharply on policy news.
Funding calm: Stable short-term rates and easy access to liquidity.
Half-point liftoff: First 50 bp hike since 2000 to tackle inflation.
Higher-for-longer message: Emphasis that inflation is still too high.
Long-end whiplash risk: Bond desks bracing for yield spikes if payrolls surprise.
Long-end yield retreat: Cooling PMIs pulling Treasury yields lower.
Measured path signal: Markets pricing gradual follow-on cuts.
Mortgage-rate squeeze: Elevated yields pushing housing costs toward multi-decade highs.
Negative-rate exit: BOJ lifting the overnight rate to 0–0.1%.
No-75-for-now relief: Powell’s pushback that briefly calmed risk assets.
Optionality on quarters: Keeping flexibility for more 25 bp moves.
Peak-rate narrative: Markets betting the hiking cycle is effectively done after this print.
Positive real rates: Policy settings now above inflation, tightening conditions.
QT countdown: Balance-sheet reduction flagged as the next tightening step.
QT runoff caps: Balance-sheet roll-off starting at $47.5B then stepping to $95B.
Quarter-point liftoff: First hike since 2018 ending the zero-rate era.
Rate sensitivity: How strongly an asset moves when interest-rate expectations change.
Rate volatility: Implied swings in interest rates.
Real yields: Nominal yields adjusted for inflation expectations.
Real-yield relief: Softer inflation easing pressure on risk assets via lower real rates.
Risk-free premium questioned: Symbolic hit to the U.S. credit halo.
Safe-haven rally: Treasuries bid as equities sell off.
Seven-hike dot path: Median outlook mapping six more moves in 2022.
Slower-pace hint: Powell flagging smaller moves ahead.
Sprint toward neutral: Markets pricing a faster path to regain policy credibility.
Supersized 75 bp catch-up: The Fed’s leap after the hot May CPI print.
Supply overhang: Heavy Treasury issuance pressuring long-end yields.
Term premium: Extra yield investors demand to hold long-duration bonds over rolling short rates.
Term Premium Rebuild: The gradual return of extra compensation required for holding long-dated bonds under uncertainty.
Term-premium rebuild: Extra compensation rising with fiscal and duration risk.
Terminal dot at 5.1%: Higher peak projected for 2023.
Terminal higher caveat: Warning that rates may still end up above prior peaks.
Treasury Firmness: Steady long-end yields signaling investors are bracing for data risk rather than crisis.
Weekend liquidity: Reduced participation that can exaggerate price swings.
YCC retirement: Scrapping the hard cap on JGB yields while keeping flexibility.