Floating-Rate Debt

A bond or loan with an interest rate that “floats” to reflect changes in borrowing rates. Floating rates are typically priced as a combination of a reference rate, such as the Secured Overnight Financing Rate (SOFR), and an added premium (or spread) that reflects perceived risk. For example, a loan priced at SOFR+450 has an interest rate of SOFR plus 450 basis points (or SOFR plus 4.5%). 

Image
Floating-Rate Debt