Floater

AAA

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."

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 TERMS
  1. Reverse Floater

    A floating-rate note in which the coupon rises when the underlying ...
  2. Coupon

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

    A bond or other type of debt whose coupon rate has an inverse ...
  4. Bond

    A debt investment in which an investor loans money to an entity ...
  5. Treasury Bill - T-Bill

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

    An interest rate benchmark upon which a floating-rate security ...
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

  4. Bond Basics Tutorial
    Retirement

    Bond Basics Tutorial

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center