What You Need to Know About Floating-Rate Notes Why would you buy a floating rate bond? Floating rate bonds offer investors protection against rising interest rates. When rates go up, the coupon on a floating rate bond adjusts upward, while the coupon on a fixed rate bond does not. This means that the holder of … Read more
A serial bond is a type of debt instrument that is issued in a series of installments, or tranches, over a period of time. Each tranche has its own maturity date and interest rate. The first tranche is typically issued at par, while subsequent tranches are usually issued at a discount to par. Serial bonds … Read more
The average effective maturity is the weighted average of the maturities of all the bonds in a portfolio. The weighting is based on the size of each bond’s market value. The average effective maturity is used to measure the sensitivity of a bond portfolio’s value to changes in interest rates. What is the difference between … Read more
A flat bond definition is a type of fixed income security in which the coupon payments are equal over the life of the bond. In other words, the coupon payments do not increase or decrease over time. The term “flat” in this context refers to the fact that the payments are always the same. What … Read more
Refunding is the process of issuing new bonds to replace existing bonds that are about to mature. The purpose of refunding is usually to take advantage of lower interest rates, but it can also be done to extend the maturity of the debt, change the terms of the debt, or raise additional funds. When a … Read more
. Yield to Maturity (YTM): What It Is, Why It Matters, Formula. Is a high yield to maturity good? A high yield to maturity is generally considered to be good, as it indicates that the bond will pay out a higher rate of interest than most other bonds. This can be advantageous for investors who … Read more
A medium-term note (MTN) is a debt instrument that is typically issued with a term of 5 to 10 years. MTNs are generally issued by large banks or corporations and are often used to raise capital for a variety of purposes, including funding capital expenditures, working capital, or acquisitions. MTNs are typically issued in large … Read more
An index-linked bond is a debt security whose interest payments are linked to a specific index, typically a consumer price index (CPI). The principal value of the bond is also indexed to the CPI, so that it retains its real value over time. Index-linked bonds are issued by governments as a way to hedge against … Read more
What is the Original Issue Discount (OID)? The Original Issue Discount (OID) is the difference between the market value of a bond and the price at which it is issued. This discount is typically given to bonds that are sold below their face value, and is used to calculate the bond’s interest payments. What is … Read more
