Smart Bond Investing—Money Market Securities and More

Auction Rate and Event-Linked Securities

 

Auction Rate Securities

 

Auction rate securities (ARS) are often debt instruments (corporate or municipal bonds) with long-term maturities, but their interest rates can be regularly reset through Dutch auctions. For many years, investors purchased ARS seeking cash-like investments that paid a higher yield than money market mutual funds or certificates of deposit. Those expectations changed in early 2008 when credit market turbulence led many ARS auctions to fail. For more information, see FINRA’s Investor Alert, Auction Rate Securities: What Happens When Auctions Fail.

 

Event-Linked Bonds

 

Event-linked bonds—also called insurance-linked, or “catastrophe” bonds—are financial instruments that allow investors to speculate on a variety of events, including catastrophes such as hurricanes, earthquakes and pandemics. For more information, see FINRA's Investor Alert, Catastrophe Bonds and Other Event-Linked Securities.

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    Asset-Backed and Preferred Securities