Master Notes
What Are Master Notes?
Master notes are short-term debt instruments issued by the Federal Farm Credit Banks Funding Corporation. They are viewed as high-quality fixed-income securities and are generally accepted as collateral for put or call options. Their purpose inside the setting of the Federal Farm Credit System (FFCS) is to give loans to rural networks and the U.S. agricultural sector.
How Master Notes Work
Situated in Jersey City, N.J., the Federal Farm Credit Banks Funding Corp. oversees different debt issuances for the banks in the FFCS. The system is a group of 71 financial institutions in the United States and Puerto Rico intended to give funding to the U.S. farming and agricultural sectors. The Federal Farm Credit Banks Funding Corp. likewise gives counseling, accounting, and financial reporting services to banks.
The corporation disperses Farm Credit Debt Securities, for example, discount notes, designated bonds, floating-rate bonds, fixed-rate bonds and retail bonds to different investors, including commercial banks, states, districts, pension and money-market funds, insurance companies, investment advisers, corporations, foreign banks and governments, and different investors in the United States and globally. It markets and disperses securities through dealers.
Banks in the system can't hold deposits, so debt issuances are their fundamental source of funding. Albeit the debt securities are not guaranteed by the U.S. government, the FFCS has a farm credit [insurance fund](/store insurance-fund), which would supply principal and interest payments should a system bank fail. System institutions are federally chartered under the Farm Credit Act and are subject to supervision, examination and regulation by a federal agency, the Farm Credit Administration.
Real World Example of Master Notes
The master notes issued by the Federal Farm Credit Banks Funding Corporation are offered with a base face value of $25 million. In that capacity, they are typically a fitting investment just for large money managers. Master notes mature in one year and pay a coupon indexed to the Fed Funds Rate or another suitable index. Money managers value these notes highly attributable to their high liquidity, as well as the fact that the principal amount can be adjusted 25% in one or the other heading. They can likewise be utilized as underlying collateral in put or a call.
As per the Federal Farm Credit Banks Funding Corporation, investors ought to have adequate information and experience in financial and business matters to assess the notes, as well as the benefits and risks of investing in them. Also, investors ought to approach, and information on, proper scientific instruments. No investor ought to purchase a note except if the investor gets it and has adequate financial resources to bear the price, yield, market, liquidity, structure, redemption and different risks associated with it.
Highlights
- Master notes are a short-term debt instrument issued by the Federal Farm Credit Banks Funding Corporation.
- Their purpose is to stretch out capital to the U.S. agricultural sector.
- Master notes are issued with a face value of $25 million, making them just doable for large and sophisticated investors.
