Certificate of Accrual on Treasury Security (CATS)
Contents
Unraveling the Mystery of Certificate of Accrual on Treasury Security (CATS)
CATS, a unique type of bond introduced by Salomon Brothers, left a mark on the financial landscape from 1982 to 1986. Let's delve into the intricacies of CATS, their features, redemption process, and their historical significance in the world of finance.
Deciphering CATS: An Innovative Bond Offering
CATS were part of a series of securities with feline acronyms, including TIGRs and LIONs, pioneered by prominent financial institutions like Salomon Brothers and Merrill Lynch. These bonds were backed by the U.S. Treasury and offered investors a novel investment opportunity.
Understanding CATS Mechanics
Unlike traditional bonds, CATS were sold at a discount and did not pay periodic interest. Instead, investors received the full face value of the bond upon maturity, representing the accrued interest over the bond's lifespan. This unique structure appealed to investors seeking alternative investment options.
The Redemption Saga: Navigating the Legacy of CATS
Following Salomon Brothers' involvement in a scandal in 1991, the fate of CATS bonds became intertwined with the bank's tumultuous history. With subsequent mergers and acquisitions, redeeming CATS bonds became a challenge for many investors. Identifying the bond's CUSIP number remains crucial for navigating the redemption process and determining the responsible entity.