Macaulay Duration
See duration.: Graphically, Macaulay Duration is the point of balance (in years) for the cash flows from the bond.
Maintenance
A set minimum margin (per outstanding futures contract) that a customer must maintain in his margin account.
Make whole call
The bond is redeemable at par plus a premium. The premium is based on the yield of the then-current treasury.
Example -- Assume a bond has a make whole + 50 basis points call provision with the current treasury trading at 6.00%. The bond would then be callable at 6.00 + 50 basis points to equal a 6.50% yield basis.
Managed futures
Represents an industry composed of professional money mangers known as commodity trading advisors who manage client assets on a discretionary basis, using global futures markets as an investment medium.
Mandatory delivery commitment
An agreement that a lender will deliver loans or securities by a certain date at agreed-upon terms.
Margin
Financial safeguards to ensure that clearing members (usually companies or corporations) perform on their customers' open futures and options contracts. Clearing margins are distinct from customer margins that individual buyers and sellers of futures and options contracts are required to deposit with brokers. Within the futures industry, a margin is a financial guarantee required of both buyers and sellers of futures contracts and sellers of options contracts to ensure the fulfillment of contract obligations. FCMs are responsible for overseeing customer margin accounts. Margins are determined on the basis of market risk and contract value. Also referred to as performance-bond margin. The amount added to a reference index that is used to determine interest rate changes on an adjustable-rate mortgage.
Margin call
A call from a clearinghouse to a clearing member, or from a brokerage firm to a customer, to bring margin deposits up to a required minimum level.
Mark-to-market
The recording of the actual market values of securities.
Market
A pricing methodology used to sell the bond at its best price available at the time the order is filled.
Market Information Data Inquiry System (MIDIS)
Historical Chicago Board of Trade price, volume, open interest data and other market information accessible by computers within the Chicago Board of Trade building.
Market maker
A brokerage or firm that is actively making bids and offers in the over-the-counter market. This is called making a market.
Market order
An order to buy or sell a futures contract of a given delivery month to be filled at the best possible price and as soon as possible. An order placed to be executed at the current best available price.
Market price
The current price of a security in the market.
Market Price Reporting and Information Systems
The Chicago Board of Trade's computerized price-reporting system.
Market risk
The possibility that the price of a security will change over time.
Market tone
A feeling or atmosphere regarding the trading in a market. If dealers and market makers are actively trading with narrow margins, the tone is considered good, and it is considered poor when the trading is less active and spreads are larger.
Marketability
A measure of the ease with which a security can be sold in the secondary market.
Marking-to-market
To debit or credit on a daily basis a margin account based on the close of that day's trading session. In this way, buyers and sellers are protected against the possibility of contract default.
Markup
The fee charged by a dealer who purchases a security from a market maker and sells it to a customer at a higher price. The fee is included in the price of the bond and is not listed separately in the order confirmation.
Maturity
The date on which a bond or note must be fully redeemed by its issuer if not subject to prior call or redemption.
Maturity date
The date on which all of the principal or any remaining principal of a debt security is due to be paid by the issuer as specified at the time of issue, unless the security is redeemed in full earlier (See final distribution date). The Ginnie Mae MBS payment date on which the final principal payment on the security is due and payable to the registered owner of the security.
Maturity date of MBS
The last possible date on which the last payment of the longest loan may be paid (also known as "stated maturity").
MBS depository
Book-entry depository for Ginnie Mae securities.
Medium-term note
A debt security issued under a program that allows an issuer to offer notes continuously to investors through an agent. The size and terms of medium-term notes may be customized to meet investors' needs. Maturities can range from one to 30 years. Fannie Mae's unsecured general obligations are offered through approved agents or underwriters. They have maturities of one day or more with principal and interest payable in U.S. dollars or other currencies.
Minimum price fluctuation
The smallest allowable increment of price movement for a contract.
Modification
Any change to the original terms of a mortgage.
Modified duration
Modified duration is an estimate of the percentage change in the price of a bond for a given change in yield. The percentage change applies to the price of the bond including accrued interest. The discrepancy between the estimated change in the bond price and the actual change is due to the convexity of the bond, which must be included in the price change calculation when the yield change is large. However, modified duration is still a good indication of the potential price volatility of a bond.
Money supply
The amount of money in the economy, consisting primarily of currency in circulation plus deposits in banks. M-1 U.S. money supply consists of currency held by the public, traveler's checks, checking account funds, NOW and super- NOW accounts, automatic transfer service accounts, and balances in credit unions. M-2 U.S. money supply consists of M-1 plus savings and small time deposits (less than $100,000) at depository institutions, overnight repurchase agreements at commercial banks, and money market mutual fund accounts. M-3 U.S. money supply consists of M-2 plus large time deposits ($100,000 or more) at depository institutions, repurchase agreements with maturities longer than one day at commercial banks, and institutional money market accounts.
Moody's credit ratings
A designation given by Moody's to indicate the relative credit quality or the strength of the ability to pay a bond's obligation.
Moral obligation bond
A revenue bond which, in addition to its primary source of security, possesses a structure whereby a state pledges to make up shortfalls in a debt service reserve fund, subject to legislative appropriation. There is no legal obligation for the state to make such a payment, but market participants recognize that failure to honor the "moral pledge" would have negative consequences for the state's own creditworthiness.
Mortgage
A legal instrument that creates a lien upon real estate securing the payment of a specific debt. A legal document in which real property is pledged to a lender as security for the repayment of the loan. The term also is used to refer to the loan itself. Ginnie Mae securitizes mortgage loans either insured or guaranteed by FHA, RHS, or VA.
Mortgage-Backed Securities Clearing Corporation (MBSCC)
Facilitates the post-trade activities of the mortgage-backed securities market.
Mortgage-backed securities (MBS)
An investment instrument that represents ownership of an undivided interest in a group of mortgages. Also refers to securities backed by mortgage loans, including pass-through securities, modified pass-through securities, mortgage-backed bonds, and mortgage pay-through securities. The securities can be issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, or the Government National Mortgage Association. Investors receive payments from the interest and principal payments made to the mortgages.
Mortgage banker
An entity that originates mortgage loans, sells them to investors, and services the loans.
Mortgage loan
A loan secured by a mortgage. Generally, debt that is evidenced by a mortgage note and is secured by a mortgage.
Mortgage note
The evidence of debt that is secured by a mortgage.
Mortgage pass-through securities
Securities that represent a direct interest in a pool of mortgage loans. The pass-through issuer or servicer collects payments on the loans in the pool and "passes through" the principal and interest to the security holder on a pro rata basis. A mortgage pass-through security is one type of mortgage-backed security.
Moving-average charts
A statistical price analysis method for recognizing different price trends. A moving average is calculated by adding the prices for a predetermined number of days and then dividing by the number of days.
Multi-dealer systems
Multi-dealer systems provide customers with consolidated orders from two or more dealers and provide customers with the ability to execute from among multiple quotes. Often, multi-dealer systems display to customers the best bid or ask price for a given security among all the prices posted by participating dealers.
Multi-family housing
A building with more than four residential rental units.
Multiple issuer pool
A mortgage-backed securities pool, formed as a Ginnie Mae II MBS, normally consisting of more than one loan package. All of the loan packages in the pool will have similar characteristics. The resulting pool backs a single issuance of securities.
Municipal bonds
Debt securities issued by state and local governments, and special districts and counties. Fixed Income Securities issued by state and local governments or their agencies.
Mutual fund
Also known as an open-end investment company. To differentiate it from a closed-end investment company, mutual funds invest pooled cash from many investors to meet the fund's stated investment objective. Mutual funds stand ready to sell and redeem their share at any time at the fund's current net asset value -- total fund assets divided by shares outstanding. A mutual fund is an organization that creates a portfolio by investing funds in securities, such as Ginnie Mae securities. Mutual funds are "open-ended" so that the portfolio investment may change. Ginnie Mae does not directly guarantee owners of fund shares; therefore, these owners must look to their mutual fund for payment, even if the portfolio consists solely of Ginnie Mae securities.