Fixing floaters: how the 10y10y rate can save FRNs

Experts from Crédit Agricole’s rates team explain how use of a forward euro fixing can bring positive carry and improve coupons

Fixing-floating-rate-notes
Solving the problem of negative carry in floating rate indexation

For some time now, floating rate notes have compared poorly to their fixed rate cousins in Europe due to the shape of the yield curve. The forward curve is structurally steeper than the spot version, and since pricing is based largely on the former, it means the coupon available on a floating note suffers.

But the problem isn’t the rates environment in Europe; it is the indexation that is used.

Typically, a floating rate note will reference three-month Euribor or the 10-year constant maturity

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: