Medium Term Notes

Medium term notes were made to satisfy a need. There are long-term and short term bonds.

The industry inside the US change based primarily on the vehicle industry regarding medium term notes. Nonetheless medium term notes were necessary to companies and banks to distibute with their adaptability of the note. General Motors, the vehicle company, made the MTN market in the early 1970s as an extension of the commercial paper market, in place of the bank EU MTNs or Western european Medium Term Notes or EMTNs. To enhance their asset-liability management, the car finance corporations wanted to issue debt with a maturity that matched that of their vehicle loans, five years, to dealers and clients. Nevertheless underwriting costs made bond offerings with short maturities not really worth the time, and maturities on commercial paper can't surpass 270 days, for MTNs in the States Market.

The vehicle finance firms started to sell MTNs to speculators, and what started as the investing boom of MTNs. In the early seventies, the expansion of the market was impeded by illiquidity in the secondary market and by stocks rules requiring approval by SEC of any changes to a registered public offering.

With the increased costs of issuance, which obstructed borrowers because they were forced to get approval by the SEC every time they posted their offerings on the screen. To prevent this regulatory hurdle, some firms sold MTNs in the personal placement, secondary, market. This is the market that brokers are endeavoring to "get paid" or do a deal. Nonetheless over ninety nine percent of the deals are fraudulent! 

What's a Medium Term Note? 

A medium term note, (MTN) is a debt instrument or note that often matures in 5 to 10 years, but the term could be less than one year or so long as twenty years. Medium term notes can be issued with a fixed or floating voucher, with the fixed rate being in more demand. A floating rate medium term notes can be as straightforward as paying the holder a voucher linked to Eurobir, Euroclear, with certain basis points. 

Some of the medium term notes can be "structured" notes linked to treasuries or other indices. When in demand in Europe, they're called "EMTN" or European Medium Term Notes and usually called MTNs, Medium Term Notes, in the US.  Most of the banks in Europe will make references to them as "Bank Debentures." Also, MTNs can be issued with a fixed maturity date, which makes them "non-callable", or can be issued with triggers where the notes can be redeemed early based mostly on certain parameters. MTNs are most generally issued as senior, unsecured debt of investment grade credit rated entities which have fixed rates. 

Medium term notes