Debt (Government, Corporate, & Banks). Daniela Ramírez | Karla Castro
Bank bonds
Features
Purpose
Promissory Notes
Definition
Features
Raise capital for banks.
Short-term instruments where the bank promises to pay a fixed sum
Issued by banks; can be traded on the stock market.
Includes periodic returns (coupons) that can be cashed or traded.
Lower risk and lower returns; ideal for conservative investors.
Backed by the issuing bank's assets.
Fixed interest rate (PRV) and yields payable at maturity
Flexibility
Are regulated by the National Banking and Securities Commission (CNBV).
Terms from 7 to 360 days
Investment starts at $100,000, with renewals as low as $2,000
No early withdrawal; possible to take loans under favorable conditions
Investors can trade bonds for liquidity before maturity.
Commercial Paper
Definition
Short-term negotiable credit issued by companies to finance working capital.
Security: Backed by the Institute for the Protection of Bank Savings (IPAB)
Features
Higher returns due to higher risk.
Unsecured, based on company financial strength.
Risk
El Reporto
Evaluating the issuer is critical due to lack of collateral.
Bankers’ Acceptances (BAs)
Definition
Parties
Reportador/Lender
Bills of exchange issued by companies and accepted by banks.
Reportado/borrower
Types
Buys credit titles for a specific period, expects payment plus premium
Private
Public
Not traded on exchanges
Temporarily transfers ownership of credit titles in exchange for funds
Registered with national securities registry, available to wider investors.
Nature
Purpose
A real contract that blends loan and buy-sell elements
Duration
Used primarily for company financing, often linked to foreign trade
Typically up to 45 days and contract can be renewed
Features
No direct interest; profit through negotiation discounts.
Outcome
Secured by company assets.
Historical context
Borrower repays principal and premium, or lender retains credit titles if not repaid
Popular in the 1970s-80s, declined in the 1990s.
Summary
Certificates of Deposit (CDs)
Definition
Agreements where a depositor places funds with a bank for a fixed period in return for a predetermined interest rate
Bank Bonds: Long-term, low-risk.
Features
Promissory Notes: Short-term, secure, backed by IPAB.
Guaranteed Returns
Terms
Security
Often insured by institutions like the FDIC
Typically range from one month to several years
Fixed interest rates offer predictability
Commercial Paper: Short-term, higher risk but higher returns.
Certificates of Deposit (CDs): Fixed terms, secure, predictable returns.
Drawbacks
El Reporto: Short-term financing contract, blending loans and buy-sell features.
Early withdrawals usually incur penalties, making them less flexible than savings accounts
Bankers’ Acceptances: Bills of exchange, historically significant for trade finance.