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 ?
Additionally, the fund's policy toward investment in variable rate demand notes requires interest rate reset features to be correlated to money market indexes, generally the higher of the 30-day and 90-day commercial paper composite.
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.
Included are tax-exempt commercial paper, variable rate demand notes, short-term variable rate participation certificates, tax, bond and revenue anticipation notes and other short-term municipal securities.
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.
The "VMIG 1" portion of the rating on the variable rate demand notes reflects the presence of a standby purchase agreement with Morgan Guaranty Trust Company, New York, Canadian Imperial Bank of Commerce, The Bank of Tokyo, Ltd.
Liquidity is further supported by the daily and weekly maturity of variable rate demand notes held in the portfolio.
Series C-F, G, H, J, K, $1 billion variable rate demand notes due April 26, 1993, which have a standby bond purchase agreement with a consortium of banks, are rated 'F-1+/F-1+'.
NEW YORK -- Fitch Ratings has assigned a long-term underlying rating of 'A' to approximately $250 million of bank bonds corresponding to variable rate demand notes (VRDNs), series 2005D issued by the Metropolitan Transportation Authority, NY (MTA, or the authority) as follows:
NYSE:LTM) announced today that its wholly owned subsidiary issued variable rate demand notes in the amount of $34,235,000 on June 13, 2008, the proceeds of which will be used to provide permanent financing for the Company's corporate headquarters in Chanhassen, Minnesota, and a fitness center in Overland Park, Kansas.
In addition, MBIA continues to successfully work with other issuers who have outstanding auction rate securities to help them access intermediate-term funding, purchase their own securities and convert transactions to variable rate demand notes to lower the cost of funding.
We have no exposure to any sub-prime mortgage securities, auction rate securities, asset-backed securities or asset-backed commercial paper, collateralized debt obligations, enhanced cash or cash plus mutual funds, structured investment vehicles (SIVs), or insured variable rate demand notes, with the exception of Financial Security Assurance ("FSA").

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