Medium-term Notes (MTNs)

· Offer to investors by the issuer's agent instead of being underwritten by investment banks and then sold to the public in one shot.
· help to cover the funding gap between commercial paper and long-term bonds
· can also come in different structures such as step up notes, inverse floaters, deleveraged floaters, range notes and index amortizing notes.
· 9 months to 30 years.

MTNs are sold in small quantities on a continuous basis whereas corporate bonds sold lump sum in large quantities at greater time intervals.

Unlike corporate bonds, investors can choose the maturity and coupon of MTN. With the help of a derivative wrapper, they can embed options, change currency, link the return to equity index, etc. MTN + Derivatives = Structured notes. Structure note a aka ule busters as it enalble institutions to bypass rules governing the use of derivatives as hedging instruments.

Shelf-registered rule
Once registered, can sell in market at discretion of the issuer. Sold at “ best effort” basis- underwriter not guarantee the price to the issuer (opposite to firm commitment underwriting arrangement).

Structured Note
A synthetic medium-term debt obligation with embedded components and characteristics that adjust the risk/return profile of the security., e.g. 5 year bond tied with an option contract for increasing the returns