There is a misconception in regards to Bank Instruments. Many potential buyers believe that there is RISK associated with the purchases of an instrument this would only be true if you are not working with a reputable provider and bank. A Buyer’s funds are ALWAYS used to buy liquid fiscal bank instruments which are worth seriously more than the applicable price. Bank instruments are typically bought in a range between 31% to 81% of the face value and are issued by credit-worthy/AA or AA-rated banks, possess market-competitive interest rates, and have a retail market value in the 90s%.
Bank instruments are purchased for a number of reason’s. One reason maybe to provide a collateral for on going commodities transaction another reason is that they could be used to provide additional collateral to satisfy a lender for funding on projects. One of the main reasons someone would purchase a Bank Instrument such as an SBLC, BG or MTN is to have the instrument available for trade in a structured buy sell PPP. To learn more about Private Placement Programs click here.
With the explosion of the internet, the secondary market has been flooded with tons of new brokers trying to broker buy/sells of medium term notes, and bank guarantees. The real discussions about bank instruments, at least for those who are successful, revolve around private placement programs.
Bank instruments, such as medium term notes and bank guarantees, are the lifeblood to any private placement program. Since these notes can be purchased at a discount from top banks, traders can earn quite a hefty profit, all while being risk free due to a prior contractual obligation they had with an “exit buyer”.
As we all know, an “exit buyer” is the entity which purchases the MTN/BG at a slightly higher value, but still discounted from face. Once the first exit buyer purchases the note from the trader, the process repeats itself several times until a final buyer purchases it to hold until maturity. By that time, the note has a very small discount (ex. 93% of face), but many conservative buyers are happy with the remaining spread and annual interest.
We have access to several high level sources for financial services for your personal and business needs. We also have made the process easy for you. We understand the market place and can provide the resources needed to Purchase Trade and Monetize your financial instruments including BG’s, SBLC’s and MTN’s, The services provided are through our trusted partners and relationships that we can share with you to assist with your specific needs. Contact us for more information.
Most people, do no truly understand that the Term Mid Term Note otherwise known as (MTN) or Long Term Note or (LTN) are nothing more than a ” debenture bond” or fixed income instruments.. If you use the term MTN or LTN with a real provider of paper they will know your a broker and probably have no idea what your talking about.
The definition for a Debenture bond is as follows.
1) (Banking & Finance) Also called: debenture bond a long-term bond, bearing fixed interest and usually unsecured, issued by a company or governmental agency
2. (Banking & Finance) a certificate acknowledging the debt of a stated sum of money to a specified person
3. (Commerce) a customs certificate providing for a refund of excise or import duty
debenture bond2. (Banking & Finance) a certificate acknowledging the debt of a stated sum of money to a specified person
Most brokers would do themselves favor and not get involved in Paper/ Bank instruments unless they have solid relationships with real sources. It takes years to understand this market and the best way to approach this would be to simply make introductions between paper providers and buyers. The issues lies in the fact that 99.999 of people out there that claim to have access to paper are unable to perform. You will find that there is plenty of buyers that are RWA however, its the paper that is for the most part extremely difficult to procure and or gain access to.
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The reason why a Top one hundred World Bank would sell instruments at ANY discount rate is the “fractional banking system”. Dependent on jurisdictions, for every $1 in a bank’s capital account, the bank can leverage that money to loan a multiplier effect of greenbacks — generally ranging from 10 or even more times. Therefore if a bank sells (as a example) a $100,000,000 MTN instrument at 30 percent, it has $3+ Million in its capital account and can lend recounted $3+ Million yearly for the duration of the instrument. The offset is the interest the Bank has to pay on the MTN.
The other critical factor to understand is that this fractional system and MTN issuance is mainly “off-balance sheet” financing, so such multi-billion buck MTN issuance does not adversely effect the capital structure or integrity of the issuing banks (which are usually ONLY the top twenty-five world EU banks). They are not handling MTNs issued by tiny banks or banks with feeble balance sheets.