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Terms used loosely to describe various tranches of interest rate or equity-linked instruments issued at the same time. A bear note can be a more 'conservative' unit providing a higher minimum return and a lower ceiling than a bull note (which provides a wider range of returns). Alternatively, the bull and bear notes can be direct offsets of one another in which the return to the bear note is essentially the mirror image of the return to the bull note. Thus, the bear note benefits from a decline in the underlying or an increase in the rate structure over a range of underlying values, while the bull note benefits from rising prices and/or falling rates. The issuer takes no market risk if the complementary tranches are arranged so that the bull note holder's gain is the bear note holder's loss and vice versa. Compare Residual Interest Bonds (RIBs) and Select Auction Variable Rate Securities (SAVRs) for a similar structure. The diagram under Reverse Floating Rate Note may be helpful in visualizing how a fixed rate payout can be divided to create a floater and a reverse floater.
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