Negative covenant
A bond covenant that limits or prohibits altogether certain actions unless the bondholders agree. |
Similar financial terms
Negative pledge clauseA bond covenant that requires the borrower to grant lenders a lien equivalent to any liens that may be granted in the future to any other currently unsecured lenders.
Negative duration
A situation in which the price of the MBS moves in the same direction as interest rates.
Negative convexity
A bond characteristic such that the price appreciation will be less than the price depreciation for a large change in yield of a given number of basis points.
Negative amortization
A loan repayment schedule in which the outstanding principal balance of the loan increases, rather than amortizing, because the scheduled monthly payments do not cover the full amount required to amortize the loan. The unpaid interest is added to the outstanding principal, to be repaid later.
Negative amortization
A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create "negative" amortization.
Affirmative covenant
A bond covenant that specifies certain actions the firm must take.
Restrictive covenants
Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividend.
Protective covenant
A part of the indenture or loan agreement that limits certain actions a company takes during the term of the loan to protect the lender's interests.
Positive covenant (of a bond)
A bond covenant that specifies certain actions the firm must take. Also called an affirmative covenant.
Bond covenant
A contractual provision in a bond indenture. A positive covenant requires certain actions, and a negative covenant limits certain actions.
Covenants
Provisions in a bond indenture or preferred stock agreement that require the bond or preferred stock issuer to take certain specified actions (affirmative covenants) or to refrain from taking certain specified actions (negative covenants).
