Floating rate note

A bond whose coupon resets with market rates

In detail

The coupon is a benchmark rate plus a fixed margin, reset at regular intervals. Because the payment keeps up with rates, the price moves far less when rates rise. The flip side is that the income falls when rates come down.

Example

A note paying the benchmark plus 0.3% yields 1.3% when the benchmark is 1%.

Related terms

Coupon rate Interest rate risk Policy rate

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