Sunday, November 8, 2009

Medium Term Notes (MTN’s) ?

One should be careful to distinguish between Prime Bank Notes (PBN's), Prime Bank Debentures (PBD's) and Medium Term Notes (MTN's). Both forms do not exist but MTN does. The difference has to be careful because sometimes PBN and PBD are intertwined and fraudsters will package it into MTN. In the article entitled "The Anatomy of the Medium-Term Money Market" published in the "Federal Reserve Bulletin," Volume 7, Number 8, 1993 which appears in the monthly publication of the Publications Committee of the Federal Reserve System Board of Governors, Washington, DC (you can log on to the website them at, or call on 202 452 3244), there's a lot of discussion about MTN.

Following are some of the topics discussed:
Mechanics of the Market
Discreet Funding with MTN’s
Reverse Inquiry in the MTN Market
Principal Transactions

There is nothing in that bulletin that indicates the validity or credibility of the transactions that fraudsters promote in their High Yield Investment Programs (HYIP). Again, the fact that MTN’s exist does not under any circumstances suggest, imply nor prove that the HYIP programs that fraudsters promote utilizing MTN’s exist.

Here are a few capsulized comments extracted from that bulletin that are for informational purposes only!

“…MTN’s have emerged as a major source of funding for U.S. and foreign corporations, federal agencies, supra-natural institutions and foreign countries.”

“Although MTN’s are generally offered on an agency basis, most programs permit other means of distribution. For example, MTN programs usually allow the agents to acquire notes for their own account and for resale at par or at prevailing market prices.”

“The MTN market also provides corporations with the ability to raise funds discreetly because the issuer, the investor, and the agent are the only market participants that have to know about a primary transaction.”

“Another advantage of MTN’s is that investors often play an active role in the issuance process through the phenomenon known as reverse inquiry.” “…(here) the investor relays the inquiry to an issuer of the MTN’s through the issuer’s agent. If the issuer finds the terms of the reverse inquiry sufficiently attractive, it may agree to the transaction even if it was not posting rates at the maturity that the investor desires.”

“…in the distribution process…a larger share of MTN’s are sold on a principal basis, rather than on an agented basis. In a principal transaction, the MTN dealer purchases an MTN for its own account and later resells it to investors. In a “riskless principal” transaction, when the dealer buys the MTN, it has already lined up an investor that has agreed to the terms of the resale.”

“MTN’s have become a major source of financing in international financial markets, particularly in the Euro-market. Like Euro-bonds, Euro-MTN’s are not subject to national regulations, such as registration requirements. Although Euro- MTN’s and Euro-bonds can be sold through the world, the major underwriter and dealer are located in London, where most offerings are distributed.”

It is important to be repetitive here: the above excerpts are for informational purposes only and under no circumstances should one believe that HYIP programs that are promoted by fraudsters in the buying and selling of MTN’s are real. They are not!

1 comment:


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