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 ?
Variable rate demand notes are subject to the borrower's ability to pay interest and principal on a timely basis, market price fluctuation if sold prior to maturity, and the potential lack of marketability which may limit the ability to sell the VRDN quickly enough to prevent or minimize loss.
Fitch notes that lengthy tender notice and funding periods may create greater liquidity risk for MMFs relative to conventional variable rate demand notes with a seven-day tender notice.
The fund pursues its investment objectives by investing in a portfolio of high quality, short-term municipal obligations, which may have fixed, floating, or variable rates of interest, and typically include variable rate demand notes (VRDNs) putable to a third party financial institution in seven days or less
Longer term, ABCP holdings have declined, offset by rises in repos, government holdings and variable rate demand notes (VRDN).
Supplementing existing analyses of fund composition and risk metrics, the new reporting capabilities include duration contribution by country, support providers for variable rate demand notes and other features.
These investments may have fixed, floating, or variable rates of interest, and typically include variable rate demand notes (VRDNs) putable to a third party financial institution in seven days or less, or other municipal bonds/notes.
Most of these 'F2' or equivalent rated securities are variable rate demand notes (VRDNs) with weekly put provisions and the remainder are short-dated municipal commercial paper.
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.

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