Join Mailing List

For latest news and information about Treasury and Financial Markets, enter your details below:

Market Guides > The all in cost of fixed rate issuance

Print Preview Send to a Friend Share

Published: 19th September 2009 by William Webster

Borrowers (issuers) often use the bond market to access medium and longer dated funding. Some issuers prefer variable rate liabilities, some fixed rate liabilities. All issuers want to be able to borrow the required amount at the lowest possible cost but just how does a fixed coupon bond issuer calculate the cost of funds on a floating rate basis? Let's see.

Buy the full article now for just £4.95

If you have already purchased this article, login to view it.

Document Summary

How fixed rate bond issuers swap to Libor. Matching the bond coupon and adjusting the floating rate on the swap, example of the all in cost. What happens if the bond is not issued at par. Up-front payments. Adjusting the floating payment on the swap, example of the all in cost. How much the dealer makes, example.

Related Documents

Payment RequiredMarket Guides > The all in cost of floating rate issuance 100% relevant

20th September 2009

Floating rate notes (FRNs) are bonds that pay investors a regular coupon linked to short term interest rates like three or six month Libor. This can suit the investor and issuer alike. The cost of issuance is key to the borrower. Discounts to par value and margins must be taken into account. Find out more about the all in cost.


Payment RequiredFixed coupon bonds 72% relevant

4th March 2010

A bond is a long term debt obligation. It is sold by the borrower who is called the "issuer" in order to borrow money for the medium and long term. Typically a bond will have a maturity of between 2 and 20 years. The issuer can be a bank, company or government institution. A bond normally has a known maturity or redemption date and during its life pays the investor interest. The interest payments are called "coupons". Bond investors rank prior to equity holders in liquidation but are subordinate to secured lenders. From an issuer's perspective the coupons are usually tax deductible (unlike dividend payments on equity). Bond markets provide investors with variety. One of the most frequently issued bonds is called a fixed coupon bond. This is also referred to as fixed income security or fixed rate bond.


Payment Requiredelearning > Fixed rate bonds 55% relevant

Learn about the following: What fixed rate bonds are and how they work. Some of the key terms used in the market. Why issuers and investors use fixed rate bonds. How fixed rate bonds can be evaluated. The risks fixed income bonds have.


Free to ViewMortgages - is the FTP the cost of one year money? 45% relevant

7th February 2012

Should a long dated mortgage asset be priced off the long dated cost of money? Or should it be priced off a shorter rate reflecting the fact that firms finance by borrowing short term and rolling this over?


Free to ViewAn Introduction to bonds - 29th May 2012 41% relevant

19th January 2012


Free to ViewTraining Courses > Debt Markets 40% relevant