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Inverse Floating-Rate Note
(redirected from Inverse Floaters)

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Inverse floating-rate note
A variable-rate security whose coupon rate increases as a benchmark interest rate declines.

Inverse Floating-Rate Note
A bond or other debt security with a variable coupon rate that changes in inverse proportion to some benchmark rate. For example, an inverse floating-rate note may be linked to LIBOR; as the LIBOR decreases, the coupon rate increases and vice versa. An inverse floating-rate note allows a bondholder to benefit from declining interest rates. It is also called an inverse floater.


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With the introduction of more inverse floaters into our portfolio in the last couple of years they've performed exceptionally well with rates declining and then staying low for a particularly long period of time.
Inverse floaters are CMO derivative securities whose coupon rate floats down when interest rates rise, and floats up when they fall.
He explained that mortgages, convertibles and callables are similar to inverse floaters, leveraged swaps, principal-only strips or step-up callable notes.
 
 
 
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