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

Fairway Bond

A bond with a coupon that is linked to some short-term benchmark interest rate. That is, a fairway bond carries a variable interest rate that changes according to a specified short-term interest rate. For example, a fairway bond may have a coupon of LIBOR + 0.5%. When investors believe interest rates will soon rise, they have an incentive to stay out of the bond market because their return would be locked at the lower interest rate. Fairway bonds reduce this incentive by allowing investors to take advantage of higher interest rates as they occur. A fairway bond is also called a floater. See also: Inverse floater.

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


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 ?
Eye floaters are dark spots that appear in one's vision and are "caused by age-related changes that occur as the jelly-like substance (vitreous) inside your eyes becomes more liquid," according to the Mayo Clinic.
The long-term ratings assigned to the Floater and Residual Certificates are exclusively tied to the creditworthiness of the Custodial Receipts deposited in the trusts and will reflect all changes to such ratings.
The garbage is cleaned up periodically by oceanic "garbage trucks" - ships that visit the floater and collect the garbage trapped by the floater.
What is your opinion as to when coverage ceases on the installation floater and needs to be covered under a builders risk form?
Although floaters are usually harmless, they can be associated with a retinal tear or detachment; if this is the case, you'll see a shower of floaters and spots that may be accompanied by light flashes and loss of peripheral vision.
We divided symptomatic vitreous floater patients according to the degree of discomfort that patients perceived.
We already asked the assistance of local police to confiscate the [dredge floater assembly] parts from the junk shops, he said.
Insurance policies that address these exposures are generally inland marine floaters, and include transit, storage and installation floaters.
I've gotten used to my floater, and the flashing lights no longer disturb or frighten me.
One of the most mishandled and misunderstood of any commercial inland marine coverages is the blanket installation floater. This coverage is designed to cover material, supplies, machinery, equipment and fixtures during the course of construction, fabrication, installation and/or dismantling.
In the case of the Smiths, a Brooklyn, New York, couple, a floater added only $100 to their policy premiums to insure a $75,000 antique collection that included 19th century antique furniture.
Interestingly, the yield variance between a quarterly resetting floater and a 90-day money-market instrument is not so much due to greater risk but to market inefficiency caused by a smaller universe of informed buyers.