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Debt security: Difference between revisions
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{{def| | {{def|Debt security|/dɛt/ /sɪˈkjʊərɪti/|n|{{Layman|Bond}}}} | ||
A freely transferable [[financial instrument]] evidencing [[indebtedness]]. Comes in a few different types: | |||
A freely transferable [[financial instrument]] evidencing [[indebtedness]]. Contrast [[debt securities]] to [[equity securities]] — instruments such as shares, warrants units, which pay neither principal nor interest, but rather account for the overall performance of the company who issue them. [[Debt security|Debt securities]] generally rank ahead of equity securities in the capital structure of the issuer. This is because an issuer must pays off [[creditor|creditors]] before [[shareholder|shareholders]].Comes in a few different types: | |||
===By type of issuer=== | ===By type of issuer=== | ||
*[[Government bond]]s - issued by sovereigns so existing free of [[capital structure]], logically immune to insolvency, but practically distressingly capable of default (yes we're looking at you Argentina) and of course the [[Who is queen?|“who’s queen?” gambit]] | *[[Government bond]]s - issued by sovereigns so existing free of [[capital structure]], logically immune to insolvency, but practically distressingly capable of default (yes we're looking at you Argentina) and of course the [[Who is queen?|“who’s queen?” gambit]] | ||
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*[[Secured note|Secured notes]] | *[[Secured note|Secured notes]] | ||
====[[Pari passu]]==== | ====[[Pari passu]]==== | ||
*'''[[Bond]]''': {{bondcapsule}} | *'''[[Bond]]''': {{bondcapsule}} | ||
Compare with a [[note]] — which traditionally bears interest at a [[floating rate]], and a [[medium term note]], which can be fixed, floating or structured with all kinds of exotic [[derivative]] payoffs, but is issued from a [[medium term note programme]], rather than as a stand-alone issue. | |||
*'''[[Note]]''': {{notecapsule}} | *'''[[Note]]''': {{notecapsule}} | ||
*'''[[Medium term note]]''' (or “[[MTN]]”): {{mtncapsule}} At one time, [[MTN]]s were typically issued only for a medium term — up to about 5 years — but that's all gone now. They still get called [[medium term note]]s though. In practice standalone {{tag|bonds}} and {{tag|notes}} are far less common these days, because they’re such a faff to issue and list, whereas MTNs are much easier and do pretty much the same job. I know how much you love a {{tag|metaphor}}, so think of [[bond|bonds]] and [[note|notes]] as broadsheet newspapers, and [[MTN|MTNs]] as an android app. | *'''[[Medium term note]]''' (or “[[MTN]]”): {{mtncapsule}} At one time, [[MTN]]s were typically issued only for a medium term — up to about 5 years — but that's all gone now. They still get called [[medium term note]]s though. In practice standalone {{tag|bonds}} and {{tag|notes}} are far less common these days, because they’re such a faff to issue and list, whereas MTNs are much easier and do pretty much the same job. I know how much you love a {{tag|metaphor}}, so think of [[bond|bonds]] and [[note|notes]] as broadsheet newspapers, and [[MTN|MTNs]] as an android app. | ||