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Auction Rate Bond (ARB) Definition

Contents

Understanding Auction Rate Bonds (ARBs): A Comprehensive Guide

Discover the intricacies of auction rate bonds (ARBs), a type of debt security with adjustable interest rates that serve as a financing tool for non-profit institutions and municipalities. Explore the basics of ARBs, their unique characteristics, and their impact on investors and issuers.

Unveiling the Basics of Auction Rate Bonds

Explore the fundamental concepts behind auction rate bonds, including their adjustable interest rates and fixed maturities of 20 to 30 years. Learn how ARBs are utilized by non-profit organizations and municipalities to minimize borrowing costs for long-term financing.

Delving into the Mechanics of Auction Rate Bonds

Gain insights into the functioning of auction rate bonds, their Dutch auction structure, and the process by which interest rates are reset periodically. Understand the complexities of ARBs compared to other investment options, such as money market funds and certificates of deposit.

Exploring Examples and Applications of Auction Rate Bonds

Dive into real-world examples of Dutch auctions and ARBs, understanding their implications for investors and issuers alike. Discover how the U.S. Treasury utilizes a similar auction structure and the challenges posed by illiquidity in the ARB market.