Medium Term Notes

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Medium-term notes are medium-term, fixed-interest debt securities that are normally issued up to 10 years, i.e., the maturity date is typically within 10 years of issuance. A good portion of MTN issuance has maturity dates ranging from 5 to 10 years, though by definition a medium-term note can have a maturity between 1 and 10 years.

MTN Characteristics
  1. Fixed term: 1-30 years
  2. Interest at rate fixed in advance, or subject to floating coupon rate
  3. 100 % repayment by bank on expiration date
  4. Not tradable on the stock exchange
  5. Minimum amount: to be negotiated between a buyer and seller
  6. Subject to withholding tax

MTN Clearing and Settling

Medium-term-note programs and offerings typically settle in global form. If the debt securities clear and settle in the United States, and often in the western hemisphere, The Depository Trust Company (“DTC”) will act as the clearing and settlement agency. This is called ‘book entry’. When a medium-term note is issued in the book-entry system, an agent bank for the issuer uses a computer link with The Depository Trust Company to enter the descriptive information and settlement details of the MTN offering. In Europe the common depository is Euroclear and ClearStream, who may or may not assist with the clearing and settlement of MTNs or EMTNs (euro medium term notes).

MTN - Medium Term Note Purchase

An MTN is type of security, namely a debt security, and its maturity date is typically less than 10 years. In fact, the maturity ranges from 1 to 10 years with most likely the majority of MTNs maturity between year 5 and year 10. Knowing the maturity date is a solid way for investors to compare other types of debt investments, such as comparing a medium term not to fixed income, or debt instruments.

Trade MTN

MTNs are issued in a variety of ways, the most popular being fixed or a floating coupon basis.

Floating rate medium-term notes are not too complex and essentially one can pay the holder of the MTN a coupon linked to Euribor +/- basis points. For more complex issues when buying medium term notes, one can have the structured notes linked to swap rates, treasuries, indices, and other methodologies.

An issuer needs to generate unique identifiers for the notes that are issued in a Medium-term note program. These identifiers can be International Securities Identification Number (ISIN) or Committee on Uniform Security Identification Procedures (CUSIP) depending on the market it is issued in.