Auction Rate Bond - ARB

Filed Under » ,
Dictionary Says

Definition of 'Auction Rate Bond - ARB'

A debt security with an adjustable interest rate and fixed term of 20-30 years. An auction rate bond's (ARB) interest rate is determined through a modified Dutch auction (where the price starts high and gets lower and lower until buyers are found) on a set schedule every seven, 14, 28 or 35 days. Non-profit institutions and municipalities utilize ARBs as a means to reduce borrowing costs for long-term financing.
Investopedia Says

Investopedia explains 'Auction Rate Bond - ARB'

The rates on ARBs are set in a similar way to how rates on new U.S. Treasury bills are set when they are issued. However, when an auction fails due to a lack of buyers, both bondholders and bond issuers are negatively impacted. The bondholders can't sell what is supposed to be a liquid investment and issuers are forced to pay higher default rates (set when the bonds were initially sold).

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Bond

    A debt ...
  2. Callable Bond

    A bond that can ...
  3. Discount Bond

    A bond that is ...
  4. Brady Bonds

    Bonds that are ...
  5. Annual Percentage Rate - APR

    The annual rate ...
  6. Yield

    The income ...
  7. Interest Rate Options

    An investment ...
  8. Fixed Interest Rate

    An interest rate ...
  9. Interest Rate Ceiling

    The maximum ...
  10. Real Interest Rate

    An interest rate ...

Articles Of Interest

  1. This Is Your Brain On Stocks

    Find out how the human mind can hurt investors' portfolios.
  2. Should You Invest Your Entire Portfolio In Stocks?

    It is true that stocks outperform bonds and cash in the long run, but that statistic doesn't tell the whole story.
  3. 5 Tips For Diversifying Your Portfolio

    A diversified portfolio will protect you in a tough market. Get some solid tips here!
  4. 5 Popular Portfolio Types

    Learning how to build these portfolios will increase your investing confidence and give you financial control.
  5. How To Invest When You're Deep In Debt

    Debt is one of the biggest obstacles that prevents people from investing - but it shouldn't be.
  6. Finding Your Investing Comfort Zone

    Choosing the right investments for you is the best way to feel comfortable with your portfolio.
  7. Investors: Rely On Your Gut

    Find out how your personality and natural instincts can direct your investment choices.
  8. The Fundamental Mechanics Of Investing

    Here's a story that demonstrates why stocks and bonds were created and how they are valued.
  9. Removing The Barriers To Successful Investing

    Learn how to stop using emotion and bad habits to make your stock picks.
  10. Is Your Portfolio Beating Its Benchmark?

    Compare portfolio manager performance using the information ratio.

comments powered by Disqus
Recommended
Loading, please wait...
Trading Center