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Floater
What Does Floater Mean?
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 Floater
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 Links
- Advanced Bond Concepts - Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
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- Forces Behind Interest Rates - Get a deeper understanding of the importance of interest rates and what makes them change.
- Trying To Predict Interest Rates - Understand the various factors that influence them so you can learn to anticipate their movements for profit.
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