Okuzeka
Investing & the Stock Market vocabulary · Bonds & Fixed Income

Default

Meaning in investing & the stock market, with examples

/dɪˈfɔːlt/nounCommon term

In investing & the stock market, default means: A failure by a borrower, such as a company or government, to make interest or principal payments on its debt on time, or to keep other terms of the loan.

In Turkish: temerrüt, borcunu ödeyememe, ödeme güçlüğü

How it is used

Used as a noun and a verb: a company defaults on its bonds, and investors fear a default. Rating agencies estimate default risk, and markets price it in the yield. A 'sovereign default' is when a country cannot pay. Bondholders then often negotiate a restructuring.

Example sentences

  1. The developer's default on its dollar bonds shook confidence in the whole sector.

  2. High-yield bonds pay more because their default risk is higher.

Common collocations

  • default on a bond
  • risk of default
  • sovereign default
  • default rate
  • credit default swap
  • credit ratingA grade given by an agency such as S&P, Moody's or Fitch that shows how likely a government or company is to pay its debts on time.
  • corporate bondA bond issued by a company to raise money. It usually pays a higher yield than a government bond because the risk that the company cannot pay is higher.
  • bondA loan that an investor gives to a government or company. The issuer usually pays regular interest and returns the original amount on a fixed date.
  • yieldThe income an investment produces, shown as a yearly percentage of its price. For bonds, it is the return an investor gets if the bond is bought at today's price.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Bonds & Fixed Income

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This page explains English vocabulary for learners. It is not financial advice.