FLOATING RATE BOND

Enjoy interest returns that link with the market interest rate.

Invest in Floating (Variable) Rate Bonds from Citibank

A floating rate bond offers investors interest returns that link with market interest rates. When the reference market interest rate increases, the interest return may increase accordingly and vice versa.

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Features
  • Relatively stable bond price
  • A wide range of bonds available
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How It Works

Illustrative Example

Investing in Floating Rate Bond
Interest Return* US$8,550
Average Interest Rate* 2.85%p.a.
*
The Interest Return and Average Interest Rate are calculated based on the assumptions and criteria stated in the calculation below. They are for illustrative purposes only. Hypothetical examples are not indicative of actual or future performance, and do not represent any projection of future potential returns.

Buy a 3-year Floating Rate Bond

Principal US$100,000
Bond Price 100%
Coupon Rate 6-month LIBOR** + 0.5%
Coupon payment interval Semi-annual
Prevailing 6-month LIBOR** 2.1% p.a.

Assume 6-month LIBOR** increases by 0.25% p.a. in first two 6-month periods, stays flat for the third 6-month period and decreases by 0.25% p.a. in the last two 6-month periods.

Calculation Return/Average Interest Rate
Interest Return for the first 6-month period US$100,000 x 2.6%*** x 6/12 US$1,300
Total Interest Return

(US$100,000 x 2.6% x 6/12) +

(US$100,000 x 2.85% x 6/12) +

(US$100,000 x 3.1% x 6/12) +

(US$100,000 x 3.1% x 6/12) +

(US$100,000 x 2.85% x 6/12) +

(US$100,000 x 2.6% x 6/12)

US$8,550
Average Interest Rate (US$8,550/US$100,000) / 3 x 100% 2.85% p.a.
**
  LIBOR stands for London Interbank Offer Rate.
***
  2.6% = 2.1% + 0.5%.
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Disclaimer:Disclaimer:

This publication is for information and reference purpose only. Citibank (Hong Kong) Limited, Citigroup Inc., or any of its subsidiaries makes no warranty as to the accuracy or completeness of information provided herein. It does not constitute a solicitation, nor an offer with respect to the purchase or sale of any security. Bond investments are not bank deposits and involve risks, including the possible loss of the principal amount invested. Unless specified, these investments are not obligations of, or guaranteed or insured by Citibank (Hong Kong) Limited, Citibank N.A., Citigroup Inc. or any of its affiliates or subsidiaries, or by any local government or insurance agency. Investors investing in bonds denominated in non-local currency should be aware of the risk of exchange rate fluctuations that may cause a loss of principal. Bond prices may go down as well as up. Citibank (Hong Kong) Limited does not guarantee the existence of a secondary market for bonds. Investment products are not available for U.S. persons and might only be applicable to limited jurisdiction.