Extendible MTNs find new favour

The US extendible MTN market has seen a raft of longer-dated deals of late, tapping investor demand for two- and three-year debt which is not naturally filled by money market instruments or traditional term bond issuance. The standard extendible MTN product is a floating rate note with an initial maturity of 13 months, which investors can elect to extend out to a maximum of five years, with a pre-set pricing step-up every year. These are specifically targeted at money market funds as a higher yielding product, which allow investors to exploit the relative steepness of an issuer's credit curve and still meet 2a7 eligibility requirements.