Commercial Paper
Unsecured short-term corporate debt, 270 days or less.
What is Commercial Paper?
Issued by large, highly rated corporations to fund short-term needs. Maturities of 270 days or less exempt it from Securities Act of 1933 registration. Usually sold at a discount to face value rather than paying interest. A staple holding of money market funds.
Commercial Paper: a worked example
A corporation issues 90-day paper at $9,900 per $10,000 face.
More terms in Bonds & Cash Equivalents
Certificate of Deposit (CD)
A bank time deposit paying a fixed rate for a fixed term, FDIC insured.
Treasury Inflation-Protected Securities (TIPS)
Treasuries whose principal adjusts with the CPI.
Zero-Coupon Bond
Sold at a deep discount, pays no interest, matures at par.
Asset-Backed Securities (ABS / MBS)
Bonds backed by pools of loans - mortgages, auto loans, credit cards.
General Obligation (GO) Bond
A municipal bond backed by the issuer's full faith, credit, and taxing power.
Revenue Bond
A municipal bond repaid only from the revenue of a specific project.
Insured Municipal Bond
A muni with third-party insurance guaranteeing principal and interest.
Municipal Bond Tax Treatment
Interest usually federally tax-free; gains are not.