All to Know About Floating-Rate Note (FRN)

floating rate notes

Floating-Rate Notes (FRNs) are considered a good investment choice in a rising interest rate environment since their coupon rates adjust to the prevailing market rates. The interest rate of an FRN is generally based on a benchmark rate like LIBOR, which is considered the most widely used benchmark rate for floaters.

Investors interested in investing in FRNs should consider the creditworthiness of the Issuer, as well as the terms of the Note. The terms of the note, including the spread over the benchmark rate and the frequency of coupon payments, can vary widely from one Issuer to another. Additionally, investors should consider whether the FRN is callable or puttable and whether there are any restrictions on trading the security.

FRNs can be traded on Exchanges or in the over-the-counter market, and investors can purchase individual securities or invest in mutual funds or Exchange-Traded Funds (ETFs) that hold FRNs.

Overall, FRNs offer investors a way to invest in debt securities while maintaining a measure of protection against interest rate risk. However, as with any investment, investors should carefully consider their investment objectives, risk tolerance, and investment horizon before investing in FRNs.


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