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FRNs are medium- to long-term debt obligations with variable interest rates that are adjusted periodically (typically every one, three, or six months). The interest rate is usually fixed at a specified spread over one of the following specified deposit rates:

- London interbank offered rate (LIBOR),
- London interbank bid rate (LIBID), or
- London interbank mean rate (LIMEAN) (average of LIBOR and LIBID).

Floating rate notes are negotiable and transferable securities with flexible interest rate, fixed rate, fixed interest periods, and issued in predetermined and uniform amounts. (External Debt: Definition, Statistical Coverage and Methodology, A Report by an International Working Group on External Debt Statistics of the World Bank, IMF, BIS, OECD, OECD, Paris, 1988, Glossary)

FRNs may also use short-term obligations of the U.S. government (Treasury bills) to establish their interest rate. Interest is payable at the end of each interest period.

Variants of FRN are:

- Drop-lock Bond
- Mismatch FRN
- Mini-max (or Collared) FRN
- Capped FRN
- Flip-Flop FRN
- Convertible rate FRN
- Variable rate note.

Source Publication:
Coordinated Portfolio Investment Survey Guide, Second Edition, International Monetary Fund, 2002, Washington DC. Appendix VI: Definition and Description of Instruments.


Statistical Theme: Financial statistics

Created on Thursday, August 01, 2002

Last updated on Wednesday, March 05, 2003