RESET BOND Meaning and
Definition
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A "reset bond" refers to a type of fixed-income security that has a feature allowing the issuer to reset the interest rate at predetermined intervals. Reset bonds are typically long-term debt securities issued by corporations or governments. This type of bond provides investors with greater flexibility and protection against interest rate fluctuations.
The reset feature of these bonds allows the issuer to adjust the coupon rate periodically to reflect current market conditions. This adjustment is typically based on a pre-determined formula or benchmark rate, such as the U.S. Treasury rate or LIBOR. The reset bond's interest rate can either be increased or decreased, depending on prevailing market rates.
Reset bonds are often issued with longer maturities, allowing investors to benefit from potentially higher interest payments over time. This feature makes reset bonds attractive to risk-averse investors seeking stable income streams. By periodically resetting the bond's coupon rate, investors are protected against interest rate risk, as the bond's yield is adjusted to match prevailing market rates. Additionally, the reset feature also allows issuers to obtain funding at more competitive rates, making reset bonds appealing to both parties involved.
Investors interested in reset bonds should carefully analyze the terms and conditions provided by the issuer, including reset frequency, reset formula, and associated costs. It is crucial to understand the risks associated with the reset bond, such as the potential for lower future coupon payments during periods of declining interest rates.
Common Misspellings for RESET BOND
- eeset bond
- deset bond
- feset bond
- teset bond
- 5eset bond
- 4eset bond
- rwset bond
- rsset bond
- rdset bond
- rrset bond
- r4set bond
- r3set bond
- reaet bond
- rezet bond
- rexet bond
- redet bond
- reeet bond
- rewet bond
- reswt bond
- resst bond
