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 ?
There were $375 billion of so-called variable-rate demand notes outstanding, according to the Securities Industry and Financial Markets Association, of which.
variable-rate demand notes series 1998 (LOC: Huntington National Bank) at 'BBB+/F2'.
NEW YORK -- Fitch Ratings withdraws its 'A/F1' rating assigned to the Independence Place Fort Campbell Patriots (TN) variable-rate demand notes series 2008, which was based on the support of an irrevocable direct-pay letter of credit (LOC) provided by Bank of America, N.
Average portfolio composition of prime institutional MMFs remained relatively stable during the second quarter of 2010, although Fitch would note moderate increased holdings of Treasury securities and variable-rate demand notes issued by municipal entities.
Approximately 80% of the fund's total assets are invested in variable-rate demand notes (VRDNs) issued by municipal entities and supported by a letter of credit (LOC) or stand-by purchase agreement (SBPA) provided by rated third-party financial institutions.
Additional liquidity can be derived from nearly $838 million of variable-rate demand notes held by DISH.
Fitch-rated tax-exempt MMFs maintained a nearly constant level of investments in variable-rate demand notes (VRDNs) between June 2008 and June 2009.
In response to the disruption in the auction-rate market, management has converted $550 million of auction-rate securities to insured variable-rate demand notes in 2008, leaving approximately $120 million of auction-rate debt with low interest rate caps in place.
11, 2008, STIC LAP comprised 40% asset-backed commercial paper (ABCP), 28% certificates of deposit, 17% commercial paper, 6% floating-rate securities issued by banks and other captive finance companies, and 9% other instruments, including bank notes, master notes, repurchase agreements and variable-rate demand notes.
On variable-rate demand notes (VRDNs), tender option bonds (TOBs) and other municipal structured transactions with MBIA insurance where Fitch withdraws its long-term rating, Fitch will also withdraw its short-term rating.
On variable-rate demand notes (VRDNs), tender option bonds (TOBs) and other municipal structured transactions with Ambac insurance where Fitch withdraws its long-term rating, Fitch will also withdraw its short-term rating.
The bonds will be issued as variable-rate demand notes, supported by direct pay letters of credit (LOC).

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