What is a 'Tap Issue'

A tap issue is a procedure that allows borrowers to sell bonds or other short-term debt instruments from past issues. The bonds are issued at their original face value, maturity and coupon rate, but sold at the current market price.

BREAKING DOWN 'Tap Issue'

This method of issuing additional debt was adopted by the British and French governments. Tap issues allow an organization to avoid certain transaction or legal costs and expedite fund raising. The issuer bypasses many of the initial formalities surrounding a bond issue, such as the prospectus, and proceeds to auction off the new securities. Issuing on tap is often suited for smaller fund-raising attempts, where the cost of a new issue is too high when compared to the amount borrowed.

RELATED TERMS
  1. Debt Issue

    A fixed corporate or government obligation, such as a bond or ...
  2. Refunding

    The process of retiring or redeeming an outstanding bond issue ...
  3. Issue

    1. The process of offering securities as an attempt to raise ...
  4. Bond

    A debt investment in which an investor loans money to an entity ...
  5. Bond Anticipation Note - BAN

    A short-term interest-bearing security issued in advance of a ...
  6. Income Bond

    A type of debt security in which only the face value of the bond ...
Related Articles
  1. Investing

    Basics Of Federal Bond Issues

    Treasuries are considered the safest investments, but they should still be analyzed when issued.
  2. Investing

    Explaining Original Issue Discount

    An original issue discount is the amount below par at which a bond or other debt instrument is issued.
  3. Investing

    5 Reasons to Invest in Municipal Bonds When the Fed Hikes Rates

    Discover five reasons why investing in municipal bonds after the Fed hikes interest rates, and not before, can be a great way to boost investment income.
  4. Investing

    Explaining Government Bonds

    A government bond is a debt security a government issues.
  5. Investing

    Why Companies Issue Bonds

    When companies need to raise money, issuing bonds is one way to do it. A bond functions like a loan between an investor and a corporation.
  6. Financial Advisor

    Advising FAs: Explaining Bonds to a Client

    Most of us have borrowed money at some point in our lives, and just as people need money, so do companies and governments. Companies need funds to expand into new markets, while governments need ...
  7. Investing

    Why Companies Issue Bonds

    One way for a company to raise money is to issue bonds.
  8. Investing

    What's a Debt Security?

    A debt security is a financial instrument issued by a company (usually a publicly traded corporation) and sold to an investor.
  9. Investing

    Comparing Yield To Maturity And The Coupon Rate

    Investors base investing decisions and strategies on yield to maturity more so than coupon rates.
  10. Investing

    3 Signs It's Time to Sell Your Bonds

    Learn about three major signals that you should sell your bonds right now, including impending interest rate hikes and bond issuer instability.
RELATED FAQS
  1. What are the key factors that will cause a bond to trade as a premium bond?

    Learn about the primary factor that can cause bonds to trade at a premium, including how national interest rates affect bond ... Read Answer >>
  2. Why do bond coupon rates vary so greatly?

    Learn about the two major reasons that cause bond coupon rates to vary so dramatically and what role coupons play in the ... Read Answer >>
  3. What forms of debt security are available for the average investor?

    Discover the various different types of debt securities, issued by government entities or corporations, that are available ... Read Answer >>
  4. What is the difference between yield to maturity and the coupon rate?

    Read about some of the basic differences between a debt security's coupon rate and its yield to maturity, and learn which ... Read Answer >>
  5. Who are the key players in the bond market?

    The bond market can essentially be broken down into three main groups: issuers, underwriters and purchasers. The issuers ... Read Answer >>
  6. How does a bond's coupon rate affect its price?

    Find out how a bond's coupon rate influences its price, including the role of government-dictated interest rates and 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