Global Definitions Database

Floating rate debt contains a variable coupon that is commonly equal to a money
market reference rate, or a federal funds rate plus a specified spread. Although the spread remains constant, the majority of floating rate debt contains periodic coupons that pay interest on that periodicity with variable percentage returns. At the beginning of each coupon period, the rate is calculated by adding the spread with the reference rate. This structure differs from the fixed-bond rate which locks in a coupon rate.