Scubidu,

The issue of the appropriate duration for a bond to be termed as a MTN lies in the eye of the one viewing it. In my case, any bond that has a duration of between two and ten years is a MTN while you hold the view that anything less than five years is not.

The reason for my view is that its what I tend to see in practise...a good example would be the US Treasury securities system.

I do agree with you that most bank loans are in the two to four year range. But remember that banks also hold other investments like interbank deposits (which are mostly overnight) or mortages and government securities which may have durations greater than ten years.

Hence, wouldn't it make sense for you to find out the weighted average duration of all the assets that a bank has? Let me know if you need further clarification on this.


Lastly, equity financing and/or long term borrowing would be best suited for long term investments. One of the reasons that Uchumi went under was that it was using overdraft facilities to finance its grand expansion plans. Banks got jittery with the plan and started demanding repayment of the overdrafts.

If one needed fincing for working capital purposes, it would thus be better if one got short term financing like commercial paper (Kenol and TPS Serena use this option), overdraft facilities and/or lines of credit.

Hope this helps.