Long Inverse Floating Exempt Receipt - LIFER


DEFINITION of 'Long Inverse Floating Exempt Receipt - LIFER'

A floating rate debt security traded among qualified institutional buyers (QIBs) and originated by German financial firm Deutsche Bank. The receipts pay a yield equal to a fixed base interest rate minus the floating rate of a benchmark (such as LIBOR+). As such, the interest rate paid moves inversely to the direction of the variable rate itself.

BREAKING DOWN 'Long Inverse Floating Exempt Receipt - LIFER'

LIFERs fall under municipal structured finance; the underlying cash flows for the receipts are provided by municipal authorities, such as airports, roads and schools. These securities are generally exempt from registration with the SEC under a provision in the Securities Act of 1933 known as Rule 144A. Bearer-bond versions (that offer no coupon) are also allowed for trade in the U.S. under Regulation S.

LIFERs are considered more volatile than vanilla floating-rate notes, as the fixed rate of the contract will be set higher than the typical ranges of the (variable) benchmark, and often by a larger margin than the benchmark is from zero. Their complexity and increased risks are why they are only traded among QIBs.

  1. Plain Vanilla

    The most basic or standard version of a financial instrument, ...
  2. Floating Interest Rate

    An interest rate that is allowed to move up and down with the ...
  3. Qualified Institutional Buyer - ...

    A corporate entity that falls within the "accredited investor" ...
  4. Bearer Bond

    A fixed-income instrument that is owned by whoever is holding ...
  5. Securities Act Of 1933

    A federal piece of legislation enacted as a result of the market ...
  6. Rule 144A

    A Securities & Exchange Commission rule modifying a two-year ...
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