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. Floating Rate Fund

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

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

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

    The band of prices that a security trades at in a specified period, ...
  6. Accreted Value

    The value, at any given time, of a multi-year instrument that ...
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

    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.
  3. Investing

    How Are Zero-Coupon Municipal Bonds Taxed?

    What every investor needs to know about taxes and zero-coupon muni bonds.
  4. Investing

    Float Over to Floating Rate ETFs

    Floating rate notes are another avenue for bond investors to consider when it comes to reducing interest rate risk.
  5. 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.
  6. Investing

    Floating Rate Loans Look Attractive

    The search for income continues to remain a major priority for investors, as interest rates still sit at historically low levels. In order to get yield, many have moved up the maturity ladder. ...
  7. Personal Finance

    Mortgage Asset-Liability Management Made Easy

    Should you refinance your mortgage to purchase other assets? Learn how to weigh your risk.
  8. Financial Advisor

    How to Protect IRAs from Higher Interest Rates

    Rising interest rates don’t have to translate into investment losses in an IRA. Here's how you can protect your investments.
  9. Financial Advisor

    Tips to Help Retirees Combat Low Interest Rates

    Planning for retirement in a zero interest rate environment can be tricky. Here are some ways to make it work and generate income.
RELATED FAQS
  1. 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 >>
  2. What is the formula for calculating the capital to risk weight assets ratio for a ...

    Learn about the Macaulay duration and zero-coupon bonds, the formula used for the calculation and how to calculate the Macaulay ... Read Answer >>
  3. Why is the time value of money (TVM) an important concept to investors?

    Understand why the time value of money is an important concept for investors. Learn when present value and future value calculations ... Read Answer >>
  4. What is the difference between an options contract and a futures contract?

    Both futures and options trading are considered advanced forms of market trading, and require additional training or the ... Read Answer >>
Hot Definitions
  1. Investing

    The act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit.
  2. Stagflation

    A condition of slow economic growth and relatively high unemployment - a time of stagnation - accompanied by a rise in prices, ...
  3. Notional Value

    The total value of a leveraged position's assets. This term is commonly used in the options, futures and currency markets ...
  4. Interest Expense

    The cost incurred by an entity for borrowed funds. Interest expense is a non-operating expense shown on the income statement. ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the ...
Trading Center