DEFINITION of 'Floater'

A bond or other type of debt whose coupon rate changes with market conditions (short-term interest rates). Also known as "floating-rate debt."


For example, a floater bond may have the coupon rate set at "T-bill rate plus 0.5%."

This type of instrument is more beneficial to the holder as interest rates are rising because it allows the holder to participate in the upward movement in rates. Conversely a floater is less advantageous to the holder when rates are decreasing because the rate at which they are receiving interest is declining.

  1. Coupon

    The interest rate stated on a bond when it's issued. The coupon ...
  2. Bond

    A debt investment in which an investor loans money to an entity ...
  3. Reverse Floater

    A floating-rate note in which the coupon rises when the underlying ...
  4. Inverse Floater

    A bond or other type of debt whose coupon rate has an inverse ...
  5. Reference Rate

    An interest rate benchmark upon which a floating-rate security ...
  6. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with ...
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