Variable-rate demand note


Also found in: Acronyms.

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 ?
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).
Those funds principally invest in the highest quality instruments that present minimal credit risk to the portfolio such as high quality commercial paper, asset-backed commercial paper (ABCP) and other short-term debt securities, including floating- and variable-rate demand notes of U.
The bonds are variable-rate demand notes which Fitch expects to rate, based on liquidity provided by DEPFA and Dexia Credit Local.
Fitch Ratings assigns an 'A-/F1' rating to the $23,325,000 PHF Investments, LLC, taxable variable-rate demand notes, series 2004-A (the notes).

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