Investopedia

Continue to Site »

Residual Interest Bonds - RIBS

Filed Under » ,
Dictionary Says

Definition of 'Residual Interest Bonds - RIBS'

A type of inverse floating-rate bond created by dividing the income from a municipal bond into two portions. The municipal bondholder will create two new securities: a primary direct floating-rate bond and a residual inverse floating-rate bond. The floaters will be linked to a reference interest rate, such as LIBOR, and the municipal bond's income will be used to pay the coupon on the direct floater, with any remaining income going toward the residual interest bond.
Investopedia Says

Investopedia explains 'Residual Interest Bonds - RIBS'

Because the residual interest bond is an inverse floater and only pays a residual income, its price will be highly sensitive to changes in interest rates. As market interest rates increase, investors can expect to see large decreases in the value of a residual interest bond.

Articles Of Interest

  1.

    The Advantages Of Bonds

    Bonds contribute an element of stability to almost any portfolio and offer a safe and conservative investment.

  2. The Basics Of Municipal Bonds

    Investing in these bonds may offer a tax-free income stream but they are not without risks.

  3. Avoid Tricky Tax Issues On Municipal Bonds

    Learn the rules every investor should know before buying into this "tax-free" investment.

  4. Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.

  5. Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?

  6. Why Your Pension Plan Has Sovereign Debt In It

    One type of security pensions tend to invest in is sovereign debt, or debt issued by a government.

  7. Why You Should Invest In Municipal Bond ETFs

    These versatile instruments have become popular with investors in higher tax brackets and fill a specific niche in the wide selection of fixed-income offerings.

  8. 6 Popular ETF Types For Your Portfolio

    Exchange traded funds are an extremely popular diversification tool that can protect your portfolio during troubled periods.

  9. Top 5 Budgeting Questions Answered

    You don't need a degree to understand your money, begin saving and pay down debt.

  10. What is a triple tax-free municipal bond?

    At its core, a triple tax-free municipal bond is just like any corporate bond: it is a debt instrument, a loan given to a government authority or municipality in order to help it meet certain ...
comments powered by Disqus
Marketplace
Hot Definitions

  1. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  2. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  3. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  4. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  5. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  6. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.
Trading Center