Variable-rate demand note

(redirected from Variable Rate Demand Obligation)

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 ?
Auction rate securities are an alternative to variable rate demand obligation bonds.
Whereas a variable rate demand obligation would generally require a letter of credit, auction rate securities do not because the investor does not possess a put option but rather relies on the liquidity generated by the Dutch auction process and the credit worthiness of the issuer or insurer.
29 and include $500 million taxable variable rate demand obligation series 2003C1-C6 and $100 million series 2003D (taxable) bonds.
Rating Guidelines for Variable Rate Demand Obligations Issued with External Liquidity Support' (Feb.
30, 2011, Fitch Ratings will confirm the short-term 'F1+' rating assigned to the $94,000,000 Massachusetts Bay Transportation Authority General Transportation System Bonds Variable Rate Demand Obligations, 2000 Series A-1 and place on Rating Watch Negative the short-term 'F1+' rating assigned to the $94,000,000 Massachusetts Bay Transportation Authority General Transportation System Bonds Variable Rate Demand Obligations, 2000 Series A-2.
The series 2006C and 2006D bonds (bonds), which will be issued as variable rate demand obligations (VRDOs), are expected to be insured by MBIA, whose insurer financial strength (IFS) is rated 'AAA' by Fitch, and are also expected to be supported by an external liquidity facility.
The bonds are expected to be issued as variable rate demand obligations with liquidity support provided by a standby bond purchase agreement (SBPA).
The series 2006C CHFFA bonds are unenhanced variable rate demand obligations.
The district's variable rate exposure remains the same as it was when the COPs were variable rate demand obligations and paying interest based on the BMA rate.
About $302 million will be issued as subordinated taxable auction-rate securities, and $166 million as subordinated tax-exempt variable rate demand obligations (VRDO).
Fitch assigns underlying ratings of 'A-' to the Municipal Electric Authority of Georgia's (MEAG) $302 million of subordinated taxable auction-rate securities, and $166 million of subordinated tax-exempt variable rate demand obligations (VRDO).
3 billion outstanding general transportation system bonds and `AA-/F1+' on $66 million variable rate demand obligations series 1999 are affirmed.

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