What are the auction securities?

Price securities are long -term investments that pay short -term interest rates to investors. These are securities with fixed income, which provide investors with a permanent stream of income with a variable interest rate that changes during the period of agreement. These financial instruments are issued to the market or sell corporations and municipal governments as a means of generating capital. There are different types of securities auction and basic investments can be either bonds, which are debt tools or preferred stocks that are investments in capital. In both cases, the common function is a variable interest rate.

According to the terms of the traditional investment in a fixed return, the issuer of the ongoing interest payment for a specified percentage during the loan period followed by payment for the nominal value of the contract as soon as the agreement matures or expires. The key difference in the auction rate is the changing interest rate at which the payments will be produced. These rates are subject to changes at each pre -pre -A specified auction that usually occurs every seven to 35 days. Investors can freely sell their securities at these auctions. The advantage for investors has always been that it holds relatively liquid safety that can be purchased and sold quite smoothly. Buyers and security sellers are not difficult to find in liquid investment.

Another advantage for investors is that they basically invest in short -term safety because they have the opportunity to sell so often, but usually earn interest rates that exceed other short -term investments. This is because although the securities of the auction rates are technically issued as long -term contracts anywhere from the age of 20 to 30 years, onijsou liquid investments that can change their hands at auctions before the contract. Investors in auction securities are mainly corporations and rich individuals.

in the global credit crisis that developed in 2008 on the financialRiver markets have changed the nature of the securities of the auctions. The institutional sellers of these financial instruments at once could not find the buyers in regularly planned auctions. Subsequently, the holders were forced to hold these securities for a long time even after some of the issuers failed in the agreement. Because some companies rely on the securities of the auctions as a means of generating short -term cash, the fact that this market has suddenly become a disgust has played an important role in the economic shock that would be created.