medium · Debt Capital Markets bond-instruments-structures
What is the economic significance of 'Secured' in the Secured Overnight Financing Rate (SOFR)?
- The rate can only be used by 'Primary Dealers' who have secured a seat on the New York Fed's trading floor.
- The transactions are backed by Treasury collateral, virtually eliminating the counterparty credit risk in the rate itself.
- The rate is guaranteed by the U.S. Treasury to never fall below 1% annually.
- The interest payments are 'secured' against the issuer's fixed assets via a Negative Pledge covenant.
Sign up free to see the explanation and track your rank →
More Debt Capital Markets bond-instruments-structures practice
- If a company has a leverage-based pricing grid and SOFR rises significantly while leverage
- What is meant by the 'bond floor' in the context of yield analysis?
- What is a 'call schedule' for a corporate bond?
- Which of the following describes a 'step-up' coupon in a callable bond?
- What is a 'deferred call'?
- What does a 5-year bond described as 'NC2' signify regarding its call protection?
- A 'make-whole' call differs from a standard 'fixed-price' call because the redemption pric
- If a bond has a 'Par Call' feature starting 6 months before maturity, what does this mean?