What are certificates of Accrual on Treasury securities cats
Certificates of Accrual on Treasury securities (cats), type of bond, invented Bank Salomon brothers. They were produced from 1982 – 1986. Though issued by private banks, these bonds were secured by US Treasury through the creation of special legal entities (or SPE). Cat was one of a family of “feline” securities, issued at that time. Securities have been nicknamed “cat” due to their clever, cat-related reductions. Other “cat” enabled the Tigers (revenues to the Treasury income growth) and the Lions (Lehman investment opportunity notes). The tigers were the first in the family, and the creation of Merrill Lynch. Salomon brothers followed suit, creating his own brand of zero-coupon bonds.
Breaking certificates of Accrual on Treasury securities cats
Cats were sold at a substantial discount from their face value, but can be used for their full nominal value, when they are ripe. Unlike other types of bonds, cats don’t pay the interest on the coupons before maturity. The difference between the amount the investor paid for the bond and its actual face value was intended to represent the interest that would have accrued to the redemption of the bonds.
Like other securities backed by the U.S. government, cats were considered safe investments that don’t come with any risks. They were guaranteed to buy, at their full nominal value at maturity. However, these bonds were obsolete when the U.S. government began to directly issue its own zero-coupon bonds using strips (separate trading of registered interest and principal of securities) program. They are no longer available for purchase, with the exception of the secondary bond market.
The ransom cat
In 1991, Salomon brothers, the initial issuing Bank for cats, has covered the scandal over fraudulent acts. As a result, the Council the appointment of Salomon brothers’ Warren Buffett in the role of Chairman of the Board of Directors and chief Executive in order to restore the integrity and stability of the Bank. In the end, the Bank joined with a group of tourists in 1997, and later at Citibank to form Citigroup today
Due to the accumulation and merging of banks over time, many people keep cats bonds now have a hard time figuring out how to use them. The fastest way is usually to distinguish the CUSIP (Committee on uniform bond procedures securities identification) number. This number is a unique code identifying the Issuer of the bonds. As soon as the bond holder determined the Issuer, they should be able to determine the entity currently responsible for the repayment of the bonds.