floating-rate note

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Related to Variable-Rate Bond: zero coupon bond

Floating-rate note (FRN)

Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Floating-Rate Note

A bond with a variable interest rate. These bonds typically have coupons renewable every three months and pay according to a set calculation. For example, a note may have an interest rate of "EURIBOR + 1%" and pay whatever the EURIBOR rate happens to be at the time plus 1%. Some FRNs have maximum and minimum interest rates, known as capped FRNs and floored FRNs, respectively. An FRN with both a maximum and a minimum interest rate is called a collared FRN. In the United States, government sponsored enterprises issue most FRNs while banks do the same in Europe. See also: Adjustable-rate mortgage.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

floating-rate note

An unsecured debt issue with an interest rate that is reset at specified intervals (usually every six months) according to a predetermined formula. Floating-rate notes usually can be redeemed at face value on certain dates at the holder's option. Floating-rate notes pay short-term interest and generally sell in the secondary market at nearly par value. Floating-rate notes are indicated in bond transaction tables in newspapers by the symbol t. Also called floater, variable-rate note. See also convertible floating-rate note, droplock bond, variable-rate demand obligation, yield curve note.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
The bankers approached the cities offering them what they said was the best of both worlds--the cities could issue variable-rate bonds to the public, taking advantage of the initially lower rate--say, three percent.
Goldman also intends to offer five-year variable-rate bonds paying a yield of 195-210 basis points above the three-month Libor for the yen, the sources added.
The figure, combining outcomes for 10-year variable-rate bonds with a 0.72 percent coupon as well as five- and three-year fixed-rate debt carrying 0.33 and 0.18 percent rates respectively, was almost twice as much as the 391.3 billion yen raised in September.
"Our board prefers issuing fixed-rate, long-term bonds because there are no surprises," Shapiro says, noting that many other healthcare systems holding shorter, variable-rate bonds either found themselves with a higher interest rate or no buyers when the bonds came due.
In response, health care borrowers who needed to refinance their variable-rate bonds scrambled to secure letters of credit to avoid doubling (or worse) their cost to credit.
Proceeds from these variable-rate bonds, issued on behalf of The Bay Institute Aquarium Foundation, were primarily used to finance the acquisition of the existing Aquarium of the Bay as well as general development of land and site improvements at Pier 39.
The financing consisted of a $7 million LIHTC (Low Income Housing Tax Credit) equity investment and $13.1 million in permanent financing through a Freddie Mac forward commitment, which will enhance the permanent variable-rate bonds and carry an 18-year term with an amortization of 35 years.
The construction of the airport terminal has been paid for with variable-rate bonds. Since 2001, the airport has been able to hold the interest rate steady, at 4.38 percent, with help from a "swap" contract with a Lehman Brothers subsidiary.
The partnership interests were referred to as synthetic tax-exempt variable-rate bonds. Eligible partnerships were allowed to make an election to permit consenting partners to take into account their partnership income on a monthly basis.
For example, basis risk describes the risk in a fixed payer swap that the floating rate received by the issuer under the interest rate swap may not equal the floating rate paid by the issuer on the variable-rate bonds that it is hedging.

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