• Debt instruments with initial maturities greater than one year and less than 10 years.

• Coupon issues with a relatively short original maturity are often called notes. Muni notes, however, have maturities ranging from a month to a year and pay interest only at maturity; Treasury notes are coupon securities that have an original maturity of up to 10 years.

• A short-term debt security, usually maturing in five years or less. See also: Treasury Note.

• Is the instrument which represents the actual indebtedness. However, the term mortgage is often used as a synonym for the note.

 Embedded terms in definition
Debt instrument
Debt security
Interest only
Original maturity
Treasury note
 Referenced Terms
 Back up: (1) When bond yields and prices fall, the market is said to back-up. (2) When an investor swaps out of one security into another of shorter current maturity he is said to back up.(1) when yields rise and prices fall, the market is said to back up. (2) When an investor swaps out of one security into another of shorter current maturity (e.g., out of a 2-year Note into an 18- month note), he is said to back up.

 Bond: Long-term debt instrument used by business and government to raise large sums of money, generally from a diverse group of lenders. In the case of business bond issuers, a specific asset or assets are pledged as collateral.A bond is essentially a loan made by an investor to a division of the government, a government agency, or a corporation. The bond is a promissory Note to repay the loan in full at the end of a fixed time period. The date on which the principal must be repaid is the called the maturity date, or maturity. In addition, the issuer of the bond, that is, the agency or corporation receiving the loan proceeds and issuing the promissory note, agrees to make regular payments of interest at a rate initially stated on the bond. Interest from bonds is taxable based on the type of bond. Corporate bonds are fully taxable, municipal bonds issued by state or local government agencies are free from federal income tax and usually free from taxes of the issuing jurisdiction, and Treasury bonds are subject to federal taxes but not state and local taxes. Bonds are rated according to many factors, including cost, degree of risk, and rate of income.A formal certificate of debt, issued by corporations or units of government.A legal obligation of an issuing company or government to repay the principal of a loan to bond investors at a specified future date. Bonds are usually issued with a Par or face value of $1,000, representing the amount of money borrowed. The issuer promises to pay a percentage of the par value as interest on the borrowed funds. The Interest payment is stated on the face of the bond at issue.Bonds are debt and are issued for a period of more than one year. The U.S. government, local governments, water districts, companies and many other types of institutions sell bonds. When an investor buys bonds, he or she is lending money. The seller of the bond agrees to repay the principal amount of the loan at a specified time. Interest-bearing bonds pay interest periodically.The term bond refers to long-term debt of companies or governments.

 Cap: Is the ceiling, upper limit price, or interest rate which would be paid. It is analogous to a long call position.A Cap is a call option on interest rates. If the interest rates rise above the cap rate, then the seller compensates the buyer for the difference in interest rates times a notational amount. The cap can in effect convert floating rate liabilities into fixed rate liabilities. The cap on home mortgages is an example of an interest rate cap. A series of options in which the writer guarantees the buyer, a payor of floating, that he will pay the buyer whatever additional interest he must pay on his loan if the rate on that loan goes above an agreed rate, X.An upper limit on the interest rate on a floating-rate Note.

 Certificate of deposit: Abbreviated CD. Also called a time deposit, this is a certificate issued by a bank or thrift that indicates a specified sum of money has been deposited. A CD bears a maturity date and a specified interest rate, and can be issued in any denomination. The duration can be up to five years.A time deposit with a specific maturity evidenced by a certificate. Large-denomination CDs are typically negotiable.A short-term debt security, which can have a maturity period of anything from a few weeks to several years; interest rates are established by market conditions and competitive environment.A CD is a Note issued by a bank for a savings deposit that an individual agrees to leave invested in the bank for a certain term. At the end of this term, on the maturity date, the principal may either be paid to the individual or rolled over into another CD. Interest rates on CDs between banks are competitive. Monies deposited into a CD are insured by the bank, thus they are a low-risk investment. Maturities may be as short as a few weeks or as long as several years. Most banks set heavy penalties for premature withdrawal of monies from a CD. Large-denomination CD's are typically negotiable.This is a negotiable instrument. Involves fixed maturity, 2 weeks to 8 years. Face values under $100,000. The interest rates are competitive with T-Bill rates. Early withdrawals are subject to significant penalty. Holder must pay state and local taxes (unlike T-Bills). Explicitly covered by the deposit insurance.

 Circle: Underwriters, actual or potential, often seek out and circle investor interest in a new issue before final pricing. The customer circled basically made a commitment to purchase the issue if it comes at an agreed-upon price. In the latter case, if the price is other than that stipulated, the customer supposedly has first offer at the actual price.Underwriters, actual or potential as the case may be, often seek out and "circle" retail interest in a new issue before final pricing. The customer circled has basically made a commitment to purchase the Note or bond or to purchase it if it comes at an agreed upon price. In the latter case, if the price is other than that stipulated, the customer supposedly has first offer at the actual price.

 Related Terms

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