floating rate notes

Floating rate notes (FRNs) are a type of debt security where the interest payments fluctuate based on an underlying benchmark, such as LIBOR or SOFR. Unlike fixed-rate bonds with set interest, FRNs adjust their coupon rate periodically, reflecting changes in market interest rates. This means the investor's income can rise or fall with the market, helping to protect against interest rate risk. Companies or governments issue FRNs to raise funds, and investors purchase them for income that adapts to interest rate movements. They are useful for those seeking an investment that remains aligned with current market conditions.