DEFINITION of 'Bond for Bond Lending'

A lending structure used in the Federal Reserve's security lending facility, whereby borrowers receive a loan of bonds, by using all or a portion of their own portfolio of bonds for collateral. The bond for bond lending structure is different from the traditional cash for bond lending structure, in which the borrower takes the funds as cash instead.

BREAKING DOWN 'Bond for Bond Lending'

The bond for bond lending structure is sometimes preferable because it can allow for better cash management for the lender. The Federal Reserve sometimes uses this structure to help minimize the impact on the aggregate level of cash available in the banking system.

RELATED TERMS
  1. Corporate Bond

    A debt security issued by a corporation and sold to investors. ...
  2. Bond Yield

    The amount of return an investor will realize on a bond. Several ...
  3. Bond

    A debt investment in which an investor loans money to an entity ...
  4. U.S. Savings Bonds

    A U.S. government savings bond that offers a fixed rate of interest ...
  5. Bond Option

    An option contract in which the underlying asset is a bond. Other ...
  6. Securities Lending

    The act of loaning a stock, derivative, other security to an ...
Related Articles
  1. Investing

    Securities Lending: Cause Of The Next Financial Crisis?

    Securities lending can pose risks to investor's portfolios and the entire financial system.
  2. Investing

    The Basics Of Bonds

    Bonds play an important part in your portfolio as you age; learning about them makes good financial sense.
  3. Investing

    Investing in Bonds: 5 Mistakes to Avoid in Today's Market

    Investors need to understand the five mistakes involving interest rate risk, credit risk, complex bonds, markups and inflation to avoid in the bond market.
  4. Investing

    The Best Bet for Retirement Income: Bonds or Bond Funds?

    Retirees seeking income from their investments typically look into bonds. Here's a look at the types of bonds, bond funds and their pros and cons.
  5. Investing

    Top 6 Uses For Bonds

    We break down the stodgy stereotype to see what these investments can do for you.
  6. Investing

    Find The Right Bond At The Right Time

    Find out which bonds you should be investing in and when you should be buying them.
  7. Tech

    What Goldman Sachs’s Online Lending Means For Banking

    Recently Goldman Sachs has announced its entry into the online lending space. Most commonly known as an investment bank, Goldman’s newest venture may provide insight into the future of online ...
  8. Investing

    The 4 Biggest Bond Myths

    Bonds can be a great addition to a portfolio but be aware of these four myths.
RELATED FAQS
  1. What determines the price of a bond in the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market, and why bond prices and yields ... Read Answer >>
  2. Where can I buy government bonds?

    The type of bond determines where you can purchase it, so you need to decide which type of bond you would like to purchase ... Read Answer >>
  3. How does face value differ from the price of a bond?

    Discover how bonds are traded as investment securities and understand the various terms used in bond trading, including par ... Read Answer >>
  4. Can Mutual Funds Only Hold Bonds?

    Find out which mutual funds include only bonds in their portfolios. Learn why some funds invest in different types of bonds ... Read Answer >>
Hot Definitions
  1. Straddle

    An options strategy in which the investor holds a position in both a call and put with the same strike price and expiration ...
  2. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital gains tax rates - especially for corporations, investors ...
  3. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that eventually eliminated tariffs to encourage economic activity between the United ...
  4. Agency Theory

    A supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving ...
  5. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations ...
  6. Index

    A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is a hypothetical ...
Trading Center