floater

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".

Notes:

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.

See also: Bond, Coupon Rate, Fixed-Income Security, Inverse Floater, Treasury Bill

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Floater

A bond whose interest rate varies with the interest rate of another debt instrument, e.g., a bond that has the interest rate of the Treasury bill +.25%.

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floater

See floating-rate note.