|
|
| (24 intermediate revisions by the same user not shown) |
| Line 1: |
Line 1: |
| {{a|repack|{{layman|bond}}}}You will know old Grandpa Contrarian’s story of [[the farmer and the sheep]]. It is illustrated richly in every cove, inlet and waterway of the financial markets, but is no better exemplified than in the genetic structure of a [[medium term note]] programme. | | {{essay|repack|MTN structure|{{layman|bond}}}} |
| | |
| These, for the fortunately uninitiated, are architectural structures by which corporations raise funds in the international [[debt capital market]]s. Their history is long and mildly diverting at best — the type who naturally deals in debt instruments is not really given to intrigue — but for our purposes it is important.
| |
| | |
| Now: As per the panel summary, a [[bond]] of any kind is an [[IOU]], in that it represents an entitlement to be repaid a loan. In earlier epochs one would borrow against a “note” — literally a signed piece of paper indicating your preparedness to pay a sum to whoever presented it, in exchange for its surrender.
| |
| | |
| The neat thing about this kind of note is its transferability: the original lender can “[[negotiability|negotiate]]” it — sell it<ref>Or pledge, or lend it.</ref> without the issuer’s permission, or even knowledge — and its value will be the [[present value]] of the issuer’s promise to pay. A note is a unilateral contract, therefore. A conventional loan is a ''bilateral'' contract, and the job of transferring ones rights and liabilities under it is more involved, and often requires the cooperation of the borrower.
| |
| | |
| Notes therefore are liquid, transferrable things, and while they are outstanding the issuer need not even know who its creditors are. They only become present on point of any payment of principal or interest, as they would need to actually show up at the issuer’s office with their instrument in hand.
| |