Variable-rate demand note

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Variable-rate demand note

A note that is payable on demand and bears interest tied to a money market rate.

Variable-Rate Demand Note

A debt security that a holder may require the issuer to redeem before maturity. When this occurs, the issuer must pay par to the holder, and the holder loses any future coupon payments that he/she might otherwise have been due. An advantage to a variable-rate demand note from the holder's standpoint is the fact that the holder may reinvest the par value in a new bond in a time of rising interest rates. This protects the holder from certain types of interest rate risk.

Variable-rate demand notes come in two main forms. The first allows the holder to demand redemption on any of several days throughout the life of the bond, while the second only allows this on one particular day. Variable rate demand notes are also known as variable rate demand obligations, option tender bonds, or put bonds. In Canada, the most common term is a retractable bond.
References in periodicals archive ?
The funds seek to maintain liquidity through investments in variable rate demand notes (VRDNs) featuring daily or weekly put provisions to appropriately rated third parties via letters of credit or a stand-by purchase agreements.
LIPA also maintained sound capital market access, despite financial market turmoil 2007-08 and refinanced/retired auction rate securities and certain variable rate demand notes as needed.
Additional liquidity can be derived from nearly $838 million of variable rate demand notes held by DISH.
Fitch Ratings places 18 senior and two subordinate tranches on Rating Watch Negative from six variable rate demand notes (VRDN) transactions supported by a liquidity facility.
NEW YORK -- Fitch Ratings places 18 senior and two subordinate tranches on Rating Watch Negative from six variable rate demand notes (VRDN) transactions supported by a liquidity facility.
As of the same date, approximately 92% of the fund's portfolio was allocated to variable rate demand notes (VRDNs) and tender option bonds (TOBs), which benefit from having one- or seven-day put facilities provided by appropriately rated counterparties.
The fund allocates a large part of its portfolio to variable rate demand notes (VRDNs), which benefit from having one- or seven-day put facilities provided by appropriately rated counterparties.

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