Definition
The term bond-anticipation note refers to short-term securities issued by corporations, municipal and state governments; eventually retired using the proceeds from a longer-term bond. Bond-anticipation notes (BAN) are used to fund the launch of a project. These notes are then retired using the funds received from a larger bond issue.
Explanation
When a company, municipality, or state government has a near-term need to finance an emergent project, they will oftentimes issue bond-anticipation notes, which can be used to bridge the timing gap between the initial launch of a project and a bond issue that will eventually be used as a source of funding for the project. Once the longer-term, larger bond issue is in place, the money received from investors will be used to retire the BAN when it matures.
These securities are considered relatively safe investments since the notes usually mature in one year or less. Bond-anticipation notes are available through municipalities, securities brokers, as well as financial institutions. A BAN is oftentimes used to kick-start the funding of a large construction project, such as the building of a bridge, highway, stadium or tunnel. Bond-anticipation notes are one of several options municipal and state governments have at their disposal to fund a short-term need. Additional sources of funds include revenue-anticipation notes and tax-anticipation notes.
Related Terms
The term fixed-income security refers to investments that provide their owners with periodic payments in addition to the preservation of capital if held to maturity. Fixed-income securities provide their holders with a return that is known, in addition to providing a consistent payment schedule.
Moneyzine EditorJanuary 18th, 2024- The term ‘variable-income security’ refers to investments that provide their owners with a rate of return that is dynamic and determined by market forces. Variable-income securities provide investors with both greater risks and greater rewards.
Idil WoodallOctober 17th, 2023 - The term primary securities market is used to describe a portion of the capital market where new securities are issued by companies, government entities or public institutions. Also referred to as the new issues market (NIM), companies initially sell both stocks and bonds on the primary market.Moneyzine EditorSeptember 21st, 2023
- The term secondary securities market is used to describe the financial markets where investors purchase securities from other investors. Also referred to as the aftermarket, secondary market transactions such as the trading of stocks and bonds occur between investors and do not involve the issuing entity.Moneyzine EditorSeptember 21st, 2023
- The term revenue-anticipation note refers to securities issued by municipal and state governments to finance a project; while that same project provides the income required to repay creditors. Revenue-anticipation notes (RAN) are short-term debt issues that will eventually use the revenues generated by a specific project to pay investors both the interest due as well as the original principal of the loan.Moneyzine EditorSeptember 21st, 2023
- The term tax-anticipation note refers to securities issued by municipal and state governments to finance a project prior to the receipt of tax revenues. Tax-anticipation notes (TAN) are short-term debt securities that will eventually use taxes to repay expenses associated with the project.Moneyzine EditorSeptember 21st, 2023
The term equipment trust certificate is used to describe a debt instrument that is held by a trust and secured by a specific asset. Equipment trust certificates are typically backed by an asset that can be readily transported and sold. Once the debt has been repaid, ownership of the asset is transferred to the issuer of the certificate.Moneyzine EditorJanuary 17th, 2024
The term adjustment bond refers to a security issued when a corporation is recapitalized during a bankruptcy proceeding. Adjustment bonds are issued in exchange for the outstanding debt of an organization, typically with terms that will help the corporation successfully emerge from bankruptcy.Moneyzine EditorJanuary 4th, 2024
