3.6 Money Market Instruments, Floating-Rate Notes & International Bonds

Canadian Securities Course CSC

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1 Introduction & Exam Overview

About the CSC Exams

2 Chapter 1: The Canadian Investment Marketplace

1.1 The Canadian Securities Industry & the Investment Dealer's Role 1.2 Financial Intermediaries: Banks, Trusts, Credit Unions, Insurers & Pension Funds 1.3 Financial Market Trends 1.4 Investment Capital, Financial Instruments & Financial Markets 1.5 Canadian Exchanges, ATSs, Dark Pools & the Order Protection Rule 1.6 Canadian Securities Regulators, the CSA & CIRO 1.7 Investor Protection: OSFI, CIPF and CDIC 1.8 Ethics, Standards of Conduct & the Client Focused Reforms 1.9 Conflicts of Interest, Complaint Handling & Remediation

3 Chapter 2: The Economy

2.1 Economics Foundations & Measuring Economic Growth 2.2 The Business Cycle & Economic Indicators 2.3 Inflation & Interest Rates 2.4 The Labour Market & Unemployment 2.5 The Bank of Canada & the Inflation-Control Target 2.6 Implementing Monetary Policy: The Operating Band, Market Operations & Transmission 2.7 Fiscal Policy, Deficits & the Challenges of Government Policy 2.8 International Finance & Trade: The Balance of Payments and the Canadian Dollar

4 Chapter 3: Features and Types of Fixed-Income Securities

3.1 The Fixed-Income Marketplace, Bond Terminology & Security 3.2 Protective Covenants, Retirement Provisions & Extendible/Retractable Features 3.3 Government of Canada Securities: T-Bills, Marketable Bonds & RRBs 3.4 Provincial & Municipal Debt and Strip Bonds 3.5 Corporate Bonds, Credit Spreads & Bond Ratings 3.6 Money Market Instruments, Floating-Rate Notes & International Bonds 3.7 Other Fixed-Income Securities & Reading Bond Quotes

5 Chapter 4: Pricing and Trading of Fixed-Income Securities

4.1 Bond Pricing, Price–Yield Relationships & Accrued Interest 4.2 Yield Calculations & Return Measures 4.3 The Term Structure of Interest Rates & Yield Curve Theories 4.4 Fundamental Bond Pricing Properties: Volatility Rules, Duration & Convexity 4.5 Bond Market Trading & Bond Indexes

6 Chapter 5: Common and Preferred Shares

5.1 Common Shares: Ownership Rights, Voting & Restricted Shares 5.2 Dividends, DRIPs, Stock Splits & Consolidations 5.3 Preferred Shares: Features, Cumulative Dividends & Taxation 5.4 Preferred Share Variations: Convertible, Callable, Retractable, Floating & Rate-Reset 5.5 Fundamental Equity Metrics & Ratios 5.6 Stock Indexes & Averages

7 Chapter 6: Equity Transactions

6.1 Order Types, Execution & Market Mechanics 6.2 Margin Trading: Long Accounts & Borrowing 6.3 Short Selling & Short-Margin Requirements 6.4 Trading & Settlement Procedures: T+1, CDS & Confirmations

8 Chapter 7: Derivatives

7.1 Derivatives: Role, Underlying Assets & Users 7.2 Options Fundamentals: Calls, Puts & Moneyness 7.3 Option Strategies & Risk Management 7.4 Forward & Futures Contracts 7.5 Rights & Warrants

9 Chapter 8: Corporations and their Financial Statements

8.1 Corporate Structures & Corporate Governance 8.2 The Annual Report, Accounting Standards & the Auditor's Report 8.3 The Balance Sheet & Income Statement 8.4 The Cash Flow Statement & Earnings Quality 8.5 Public Company Disclosure, Investor Rights, Take-Over Bids & Insider Trading

10 Chapter 9: Financing and Listing Securities

9.1 Government & Corporate Financing: Underwriting and Syndicates 9.2 The Prospectus Process, Stabilization & Purchaser Rights 9.3 The Exempt Market & Private Placements 9.4 The Listing Process: TSX, TSXV & Capital Pool Companies 9.5 Continuous Disclosure, Material Changes & Insider Reporting

11 Chapter 10: Investment Analysis

10.1 Methods of Equity Analysis & Macroeconomic Analysis 10.2 Fundamental Industry Analysis 10.3 Company Analysis: Competitive Advantages, Governance & the Dividend Discount Model 10.4 Discounted Cash Flow & Relative Valuation Multiples 10.5 Financial Statement Ratio Analysis 10.6 Assessing Preferred Share Investment Quality 10.7 Technical Analysis: Charts, Trends & Patterns 10.8 Technical Indicators, Volume, Breadth & Sentiment

12 Chapter 11: Portfolio Analysis

11.1 Measuring Investment Return 11.2 Measuring Risk: Types of Risk, Standard Deviation & Downside Measures 11.3 Portfolio Risk & Return: Correlation and Diversification 11.4 Beta, the Capital Asset Pricing Model & the Security Market Line 11.5 Portfolio Manager Styles: Equity & Fixed Income 11.6 The Portfolio Management Process: Objectives, Constraints & the IPS 11.7 Asset Mix, Monitoring, Performance Evaluation & Rebalancing

13 Chapter 12: Alternative Investments, Other Managed, and Structured Products

12.1 Alternative Investments: Structures, Fees & Liquid Alternatives 12.2 Alternative Strategies, Performance Measurement & Due Diligence 12.3 Segregated Funds, Labour-Sponsored Funds & Listed Private Equity 12.4 Income Trusts, REITs & Closed-End Funds 12.5 Structured Products: PPNs & Market-Linked GICs 12.6 Split Shares & Asset-Backed Securities

14 Chapter 13: Mutual Funds

13.1 Managed Products & Mutual Fund Structure 13.2 Pricing Mutual Fund Units: NAVPS & Forward Pricing 13.3 Mutual Fund Fees, Sales Charges & Unit Series 13.4 Mutual Fund Regulation, Fund Facts & Account Opening 13.5 Types of Mutual Funds & Fund Management Styles 13.6 Redemptions, Withdrawal Plans & Measuring Fund Performance

15 Chapter 14: Exchange-Traded Funds (ETFs)

14.1 ETF Origins, Structure, Tax Efficiency & ETF Facts 14.2 ETF Creation, Redemption & Arbitrage 14.3 Types of ETFs & Advanced Strategies 14.4 Comparing ETFs, Mutual Funds & Individual Securities

16 Chapter 15: Working with the Institutional Client

15.1 The Institutional Marketplace & Institutional Clients 15.2 Institutional Investment Guidelines, Styles & Restrictions 15.3 Buy Side & Sell Side: Trading Desks, Revenue, Clearing & Best Execution 15.4 Block Trading, Dark Pools & Algorithmic Trading

17 Chapter 16: Fee-Based Accounts and Working with the Retail Client

16.1 Fee-Based Accounts: Managed & Non-Managed Models 16.2 Fee Transparency, CRM2 & Total Cost Reporting, and MWRR vs. TWRR 16.3 The Financial Planning Approach & the Life Cycle 16.4 Behavioral Finance, Sequence-of-Returns Risk & Client Coaching 16.5 Estate Planning Basics

18 Chapter 17: Canadian Taxation

17.1 The Canadian Taxation System 17.2 Taxation of Investment Income 17.3 Capital Gains, Losses & The Superficial Loss Rule 17.4 Registered vs Non-Registered Tax-Advantaged Accounts 17.5 Tax Planning Strategies, Pension Plans & the RDSP

3.6 Money Market Instruments, Floating-Rate Notes & International Bonds

Key Takeaways Explain This Topic AI

The money market trades debt maturing in one year or less, such as treasury bills and commercial paper.

Commercial paper can be sold without a prospectus if it matures within one year, is non-convertible and is highly rated.

Canadian banks stopped issuing bankers' acceptances after CDOR ceased in June 2024.

Floating-rate notes reset their coupon to a benchmark such as CORRA, so their prices stay close to par.

A Maple bond is a Canadian-dollar bond issued in Canada by a foreign issuer; a Eurobond is issued outside the country of its currency.

Last updated: October 2026

Short-Term and International Debt

Not all debt is long-term domestic bonds. Governments and corporations borrow for days or months in the money market, some bonds carry floating coupons, and many issuers borrow in foreign markets or foreign currencies. This section covers these instruments.

Short-Term Money Market Instruments

The Canadian money market is the wholesale financial market for debt securities with maturities of one year or less (365 days or fewer) . Money market instruments feature high liquidity, minimal price volatility, and low default risk.

Bankers' Acceptances (BAs): A Discontinued Instrument

For decades a Banker's Acceptance (BA) was one of Canada's most traded money market instruments: a short-term draft drawn by a corporate borrower and "accepted" (guaranteed) by a bank, then sold at a discount. BA rates also fed the Canadian Dollar Offered Rate (CDOR) benchmark.

When CDOR ceased publication after June 28, 2024 , Canadian banks stopped issuing BAs. Borrowers moved to CORRA-based loans and to commercial paper. Older study material may still describe BAs, so know the concept: a bank's acceptance substituted the bank's credit for the borrower's.

Commercial Paper (CP)

Commercial paper consists of short-term, unsecured promissory notes issued by large, financially stable corporations to finance working capital and seasonal cash deficits.

Maturity: Typically ranges from 30 to 365 days (most commonly 30 to 90 days).

Pricing: Sold at a discount to face value and redeemed at par on an actual/365-day basis.

Lower Borrowing Costs: CP yields are generally lower than commercial bank prime lending rates, saving large corporate issuers millions of dollars in interest expense.

Prospectus Exemption: Under National Instrument 45-106, short-term debt such as commercial paper can be sold without a prospectus if it matures in one year or less, is not convertible into other securities, and carries a sufficiently high short-term rating from a designated rating organization.

Floating-Rate Notes (FRNs)

Floating-Rate Notes (FRNs) are debt securities whose coupon rate is not fixed, but instead adjusts periodically (quarterly or semi-annually) based on a designated benchmark reference rate (such as the Canadian Overnight Repo Rate Average - CORRA ) plus a fixed spread (e.g., CORRA + 75 bps \text{CORRA} + 75\text{ bps} CORRA + 75 bps ).

Interest Rate Sensitivity: Because the coupon rate resets regularly to reflect current market interest rates, the market price of an FRN stays remarkably close to par (100.00). FRNs experience virtually zero interest rate price volatility compared to fixed-coupon bonds.

International Debt Markets: Eurobonds vs. Foreign Bonds

When borrowers tap international capital markets outside their domestic borders, the securities fall into two distinct legal classifications: International Debt Classifications

• ├── Eurobonds: Issued outside the home jurisdiction of the currency
• │ └── (e.g., Canadian bank issuing US\$ debt in London)
• └── Foreign Bonds: Issued in a domestic market by a foreign borrower in local currency
• ├── Maple Bonds: Foreign issuers in Canada denominated in CAD
• ├── Yankee Bonds: Foreign issuers in the US denominated in USD
• ├── Bulldog Bonds: Foreign issuers in the UK denominated in GBP
• └── Samurai Bonds: Foreign issuers in Japan denominated in JPY
• Eurobonds

A Eurobond is a debt instrument issued in an international market outside the regulatory jurisdiction of the country in whose currency the bond is denominated.

Example: A Canadian multinational corporation (e.g., Enbridge) issuing a US dollar-denominated bond in London , or a Japanese conglomerate issuing a Canadian dollar-denominated bond (Euro-CAD) across European and Asian markets .

Key Features: Eurobonds are underwritten by an international syndicate of investment dealers, are traditionally issued in bearer form, are not subject to domestic withholding taxes, and do not require formal registration with domestic securities regulators (such as the SEC or provincial securities commissions).

Foreign Bonds

A foreign bond is issued by a foreign borrower in a domestic capital market, denominated in that domestic country's currency, and subject to that domestic country's regulatory registration rules.

Maple Bonds: Canadian dollar-denominated bonds issued in Canada by foreign corporations, foreign banks, or supranational organizations (e.g., Apple or the Inter-American Development Bank issuing CAD bonds in Toronto). Maple bonds allow Canadian institutional investors to diversify into global companies without taking on currency exchange risk.

Yankee Bonds: US dollar bonds issued in the United States by non-U.S. borrowers (e.g., Royal Bank of Canada issuing USD bonds in New York registered with the SEC).

Bulldog Bonds: British pound (GBP) bonds issued in the UK by foreign borrowers.

Samurai Bonds: Japanese yen (JPY) bonds issued in Japan by foreign borrowers.

Classification Comparison

• Bond Category Issuer Country Country of Issuance Currency of Bond Regulatory Oversight
• Domestic Canadian Bond Canada Canada Canadian Dollar (CAD) Canadian Provincial Commissions (CSA)

Maple Bond (Foreign Bond) Foreign (e.g., USA, UK) Canada Canadian Dollar (CAD) Canadian Provincial Commissions (CSA)

Yankee Bond (Foreign Bond) Foreign (e.g., Canada) United States U.S. Dollar (USD) U.S. Securities and Exchange Commission (SEC)

Bulldog Bond (Foreign Bond) Foreign (e.g., Canada) United Kingdom British Pound (GBP) UK Financial Conduct Authority (FCA)

Eurobond (e.g., Euro-CAD) Any country International markets Canadian Dollar (CAD) International market conventions / Unregulated