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TD Securities
 
 
 
 

Money Market

TD Securities’ Money Market team is committed to thoroughly understanding client needs and producing innovative risk management solutions on a long-term basis.

 

We consistently exceed client expectations by taking an integrated approach in coordinating fixed income, derivative products and foreign exchange to provide creative solutions and best-in-class quality execution.

 

Our Products

TD Securities offers clients a comprehensive selection of products maturing in less than two years. Choose from the list below for more information:

Government of Canada Treasury Bills
  • Fully guaranteed by the Government of Canada
  • Fully liquid, can be sold at market value at any time
  • Available denominated in Canadian and U.S. dollars
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Government of Canada Strip Bonds
  • Created when the interest payment coupons are separated from the principal portion
  • Both sold as individual investments
  • May offer better returns than Government of Canada Treasury Bills
  • Fully negotiable at market prices, settlement within two business days
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Provincial Treasury Bills and Promissory Notes
  • Fully guaranteed by the issuing province
  • Offer higher yields than Government of Canada Treasury Bills
  • Fully liquid, can be sold at market value at any time
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Banker’s Acceptances (BA’s)
  • Short-term promissory notes issued by corporations and accepted by a financial institution
  • They can also be issued directly by a financial institution with no corporation involved; these are called Bearer Deposit Notes (BDN’s)
  • They have the same credit rating as the guaranteeing bank
  • Offer a higher yield than Provincial Treasury Bills and Promissory Notes
  • They are fully negotiable at market price
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Commercial Paper
  • Short-term promissory notes issued by major corporations
  • They provide one of the highest yields available for a short-term investment
  • Commercial paper is a direct obligation of the issuing corporation
  • Fully negotiable at market prices
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Asset Backed Commercial Paper
  • Asset Backed Commercial Paper (ABCP) is a short term debt obligation backed by specific pools of assets such as trade or credit card receivables, equipment leases, mortgages, and personal lines of credit
  • While the risk of regular CP depends on the issuing firm’s overall risk profile, the risk associated with ABCP is tied directly to the creditworthiness of specific financial assets
  • In order to attain the highest credit ratings by independent ratings agencies, the asset cash flows are credit enhanced. This can come in a number of forms including extra assets (over-collateralization), cash accounts, bank issued lines of credit, or insurance guarantees. As a result, senior ABCP programs typically receive R1-High credit ratings
  • TD Securities is one of the top two dealers of ABCP in Canada
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Short Corporate Bonds
  • An alternative to Commercial Paper
  • Usually offer a higher return than the Commercial Paper of the same Issuer
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Eurobonds
  • Refers to a multi-currency bond market based in Europe, but trades globally
  • The subset of Eurobonds issued in Canadian Dollars are called EuroCans
  • Usually offer a higher return than the Domestic Short Corporate Bonds of the same Issuer
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Floating Rate Notes
  • A longer-term note (typically up to 5 years) that pays a floating rate coupon that resets regularly (i.e. quarterly or monthly)
  • Floating rate is based on CDOR (an average of 8 dealers’ bankers’ acceptance bids) in Canada or LIBOR in the U.S.
  • Investor usually receives a premium versus regular money market securities due to the longer term
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Maple Bonds
  • Canadian Dollar denominated bonds issued by foreign borrowers in the domestic Canadian fixed income market
  • May provide higher returns than similarly rated Canadian issuers
  • Allow Canadian Investors to buy recognized global issuers and diversify their bond portfolios
  • Are liquid and settle on CDS similar to domestic bonds
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Interest Rate Derivatives

Canadian Interest Rate Futures (BAXES)

  • Futures contracts wherein the underlying instrument is the 3mth Canadian Bankers Acceptance and is settled against 3mth CDOR
  • Quoted on Index basis: (100 – Annualized Yield of 3mth Canadian Bankers Acceptances)
  • Cash settled with the Final Settlement Price based upon the 3mth CDOR setting on the last trading day of the contract

Forward Rate Agreements (FRA’s)

  • An agreement between two parties to compensate each other should the Market Rate be higher or lower than the Contract Rate
  • The Seller agrees to compensate the Buyer should the Market BA Rate be greater than the one specified in the contract on the settlement date. The Buyer agrees to compensate the Seller should the opposite be true
  • An important risk management tool which allows users to lock in interest rates for periods between 1 and 24 months

Basis and Cross Currency Swaps

  • An agreement between two parties to exchange Fixed or Floating cash flows in one currency for Fixed or Floating cash flows of another currency for a specified period of time on an agreed upon amount
  • For example, one party agrees to pay a Fixed Rate in CAD while the other party agrees to pay a Floating Rate in another currency (i.e. 3mth LIBOR if the currency is USD) over the term of the swap
  • Used to lock in interest rates for periods longer than 6mths
  • A Basis Swap is an example of a Cross Currency Swap where one party agrees to pay a Floating Rate in one currency (i.e. 3mth CDOR if the currency is CAD) for a Floating Rate in another currency (i.e. 3mth EURIBOR if the currency is EURO)

Interest Rate Swaps

  • An agreement between two parties to exchange Fixed cash flows for Floating cash flows for a specified period of time on an agreed upon amount
  • One party agrees to pay a Fixed Rate of interest while the other party agrees to pay a Floating Rate of Interest (i.e. 3mth CDOR) over the term of the swap
  • Used to lock in interest rates for periods longer than 6mths

Interest Rate Options

  • An agreement where one party buys the Right to Buy/Sell a specific underlying bond, interest rate or index level at a specified price for a specified period of time. Importantly, the Buyer/Seller is NOT OBLIGATED to do so and can choose to let the option to expire. The other party IS OBLIGATED to deliver on the terms of the option should the holder choose to exercise
  • Used to take advantage of either a rise or fall in interest rates at option holder’s discretion

Swaptions

  • An agreement where one party buys the Right to Pay (Payer Swaption) or Receive (Receiver Swaption an agreed upon Fixed Rate in a Swap with a specified term for a specified period of time 
  • Importantly, the Buyer/Seller is NOT OBLIGATED to do so and can choose to let the Swaption expire. The other party IS OBLIGATED to deliver on the terms of the Swaption should the holder choose to exercise
  • Used to manage interest rate risk by borrowers and investors who have future commitments at unspecified interest rates

Asset Swaps

  • A synthetic fixed or floating asset created by combining a bond or money market security and a swap
  • Potential to tailor an asset to meet client needs (specific reset dates, fixed or floating, currency denomination)
  • Trades at premium over plain vanilla Floating Rate Notes
  • Counter-party risk
  • Lower liquidity due to dual nature of product (both an asset and a swap)
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December 17, 2017
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