DEFINITION of 'Dollar Bond Index-Linked Securities - Dollar BILS'

A zero-coupon floating rate debt instrument with an interest rate that is determined by the return performance of a specified index over a given time period. The interest rate for dollar BILS is determined at maturity, once the change in the value of the specified index is known.

BREAKING DOWN 'Dollar Bond Index-Linked Securities - Dollar BILS'

Dollar BILS are typically useful for companies engaging in asset-liability matching. For example, if a company has a large liability due in six months, the company could invest its cash into dollar BILS now, rather than simply letting the cash sit idle for that time. The effective interest rate the company will receive from holding the dollar BILS will be equal to the return of the specified index during that time period, allowing the company to participate in any gains/losses the index incurs during that time period, but also still guaranteeing that the company will be able to liquidate its position for cash on the date it needs the funds to pay its liability.

RELATED TERMS
  1. Interest Rate Index

    An index that is based on the interest rate of a financial instrument ...
  2. Indexed Rate

    An interest rate charged on loans to borrowers that is calculated ...
  3. Floating Rate Fund

    A mutual fund that invests in financial instruments with a variable ...
  4. Drop Lock

    An arrangement whereby the interest rate on a floating rate note ...
  5. Variable Rate Demand Note - VRDN

    A debt instrument that represents borrowed funds that are payable ...
  6. Closing Range

    The band of prices that a security trades at in a specified period, ...
Related Articles
  1. Investing

    All About Zero Coupon Bonds

    Zero-coupon bonds are bonds that do not make any interest payments (which investment professionals often refer to as the "coupon") until maturity. For investors, this means that if you make an ...
  2. Investing

    Top 4 Money Market Fund ETFs of 2016 (SHV, NEAR)

    Learn about four money market ETFs and why they make safe additions to the short-term, conservative portion of an investor's portfolio.
  3. Investing

    Zero-Coupon Bond

    A zero-coupon bond or ‘no coupon’ bond is one that does not disburse regular interest payments. Instead, the investor buys the bond at a steep discount price; that is, at a price ...
  4. Investing

    How To Evaluate Bond Performance

    Learn about how investors should evaluate bond performance. See how the maturity of a bond can impact its exposure to interest rate risk.
  5. Investing

    Examples Of Asset/Liability Management

    In its simplest form, asset/liability management entails managing assets and cash inflows to satisfy various obligations; however, it's rarely that simple.
  6. Investing

    FLOT: iShares Floating Rate Bond ETF

    Explore detailed analysis and information of the iShares Floating Rate Bond ETF, and learn how to use this ETF as a defense against rising interest rates.
  7. Investing

    How Do I Calculate Yield To Maturity Of A Zero Coupon Bond?

    Yield to maturity is a basic investing concept used by investors to compare bonds of different coupons and times until maturity.
  8. Investing

    How Interest Rates Affect Mutual Funds

    Find out how changing interest rates impact mutual funds, including bond and money market funds, and how higher rates can discourage investors.
  9. Trading

    Managing Interest Rate Risk

    Interest rate risk stems from the possibility that an interest-bearing asset’s value will change due to changing interest rates.
  10. Investing

    What is an Index?

    An index is a statistical means of calculating a change in an economy or market.
RELATED FAQS
  1. How do I calculate the holding period return yield on a zero-coupon bond?

    Learn how to calculate the holding period return yield for a zero-coupon bond based on a formula with a relevant example ... Read Answer >>
  2. How does an investor make money on a zero coupon bond?

    Learn about investing in zero-coupon bonds, exactly how they work as an investment vehicle, and their advantages and disadvantages ... Read Answer >>
  3. What is the difference between a zero-coupon bond and a regular bond?

    The difference between a zero-coupon bond and a regular bond is that a zero-coupon bond does not pay coupons, or interest ... Read Answer >>
  4. What's the difference between EaR, Value at Risk (VaR), and EVE?

    Learn about earnings at risk, value at risk and economic value added, how these risk measures are used, and the difference ... Read Answer >>
  5. Why do interest rates tend to have an inverse relationship with bond prices?

    At first glance, the inverse relationship between interest rates and bond prices seems somewhat illogical, but upon closer ... Read Answer >>
  6. What are the advantages of using an effective interest rate figure?

    Understand what is meant by the effective interest rate, and learn why the effective rate calculation is preferred over the ... Read Answer >>
Hot Definitions
  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  2. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  3. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  4. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  5. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  6. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
Trading Center