Floating Rate Notes - Eurobonds - Credit - Markets - ICAP.com

Floating Rate Notes

Floating Rate Notes (FRNs) are debt securities bonds, of any currency, that entitle the holder to regular interest coupons. FRN coupons are reset periodically to match the London/Euribor interbank offered rate. Typically the rate agreed is the benchmark rate plus an addtional spread and is reset every three to six months.

FRNs are generally issued by corporations wishing to raise funds for capital markets. Some FRNs may have special characters defined by the issuer such as mini-max coupons. FRNs are typically traded by investors who expect interest rates to change.

FRNs can be used to balance risks incurred through other interest rate instruments in an investment portfolio. They are sensitive to interest rate changes as the coupon moves in step with the changes for better or for worse.