固定收益证 券Corporate Debt Instruments.pptVIP

* Municipal Money Market Products (continued) Commercial Paper / VRDO Hybrid The commercial paper/VRDO hybrid is customized to meet the cash flow needs of an investor. As with tax-exempt commercial paper, there is flexibility in structuring the maturity, because the remarketing agent establishes interest rates for a range of maturities. Although the instrument may have a long nominal maturity, there is a put provision, as with a VRDO. Municipal Derivative Securities (continued) In recent years, a number of municipal products have been created from the basic fixed-rate municipal bond. This has been done by splitting up cash flows of newly issued bonds as well as bonds existing in the secondary markets. These products have been created by dividing the coupon interest payments and principal payments into two or more bond classes, or tranches. The name derivative securities have been attributed to these bond classes because they derive their value from the underlying fixed-rate municipal bond. Municipal Derivative Securities (continued) Floaters / Inverse Floaters A common type of derivative security is one in which two classes of securities, a floating-rate security and an inverse-floating-rate bond, are created from a fixed-rate bond. The coupon rate on the floating-rate security is reset based on the results of a Dutch auction. Inverse floaters can be created in one of three ways: A municipal dealer can buy in the secondary market a fixed-rate municipal bond and place it in a trust with the trust issuing a floater and an inverse floater. As illustrated in Exhibit 8-1 (see Overhead 8-24), the municipal dealer uses a newly issued municipal bond to create a floater and an inverse floater. Using the municipal swaps market, one creates an inverse floater without the need to create a floater. Exhibit 8-1Creation of a Municipal Inverse Floater Municipal floating-rate bond Municipal inverse-floating-rate Fixed-rate municipal bond (newly issued or seasoned) Municipal D