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).

comments powered by Disqus
Hot Definitions
  1. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  2. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  3. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  4. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public.
  5. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public.
  6. Maritime Law

    A body of laws, conventions and treaties that governs international private business or other matters involving ships, shipping or crimes occurring on open water.
Trading Center