Another name for a floating rate note (FRN); a medium to long-term debt obligation (note) that has its coupon rate linked to some reference interest rate (specifically a money market index such as Treasury bill rates). Interest is adjusted periodically, often every three or six months. The interest rate is usually fixed at a preset spread over the reference rate which may also be one of many deposit rates (LIBOR, LIBID, or LIMEAN).
Most floaters have a maturity of five years. They provide holders with protection increases in interest rates but pay lower yields than fixed rate notes of the same maturity. Floaters are negotiable and transferable, and issued in predetermined and uniform proportions. Variants of floaters include: drop-lock bond, min-max note, capped floater, convertible floater, mismatch floater, etc.
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