Floater

A A A

DEFINITION

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

INVESTOPEDIA EXPLAINS

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.




RELATED TERMS
  1. Reverse Floater

    A floating-rate note in which the coupon rises when the underlying reference ...
  2. Residual Interest Bonds - RIBS

    A type of inverse floating-rate bond created by dividing the income from a municipal ...
  3. Coupon

    The interest rate stated on a bond when it's issued. The coupon is typically ...
  4. Inverse Floater

    A bond or other type of debt whose coupon rate has an inverse relationship to ...
  5. Bond

    A debt investment in which an investor loans money to an entity (corporate or ...
  6. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with a maturity of ...
  7. Reference Rate

    An interest rate benchmark upon which a floating-rate security or interest rate ...
  8. Cap

    The highest point to which an adjustable rate mortgage (ARM) can rise in a given ...
  9. Teaser Rate

    An initial rate on an adjustable-rate mortgage (ARM). This rate will typically ...
  10. Lifetime Cap

    The maximum interest rate on an adjustable-rate mortgage (ARM) that may be charged ...
Related Articles
  1. Forces Behind Interest Rates
    Economics

    Forces Behind Interest Rates

  2. Interest Rates And Your Bond Investments
    Investing Basics

    Interest Rates And Your Bond Investments

  3. Advanced Bond Concepts
    Bonds & Fixed Income

    Advanced Bond Concepts

    By
  4. Bond Basics Tutorial
    Retirement

    Bond Basics Tutorial

  5. Has Stock Bias Affected Your ETF Asset ...
    Bonds & Fixed Income

    Has Stock Bias Affected Your ETF Asset ...

  6. Buying bonds at a premium? Note these ...
    Bonds & Fixed Income

    Buying bonds at a premium? Note these ...

  7. Is Ukrainian Debt Worth a Look?
    Bonds & Fixed Income

    Is Ukrainian Debt Worth a Look?

  8. Will The High Times In High Yield Continue? ...
    Bonds & Fixed Income

    Will The High Times In High Yield Continue? ...

  9. Unconstrained Investing: What It Is ...
    Bonds & Fixed Income

    Unconstrained Investing: What It Is ...

  10. How To Earn The Most From CDs When Interest ...
    Bonds & Fixed Income

    How To Earn The Most From CDs When Interest ...

comments powered by Disqus
Hot Definitions
  1. Identity Fraud Reimbursement Program

    A financial product that offers reimbursment for the costs associated with having been a victim of identity theft. These costs may include getting affidavits notarized for police and financial institutions, postage for sending certified mail to police and financial institutions, lost earnings resulting from time spent recovering one's identity, and legal fees.
  2. Cash and Carry Transaction

    A type of transaction in the futures market in which the cash or spot price of a commodity is below the futures contract price. Cash and carry transactions are considered arbitrage transactions.
  3. Amplitude

    The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
  4. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  5. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  6. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
Trading Center