3 ms·

Huh? There are plenty of adjustable rate bonds? That was a big part of why the LIBOR scandal was such a big deal?

by RC_ITR 3y ago

nly 3y ago
I'm not familiar with any adjustable rate bonds tbh. All corporate bonds and gilts I've ever seen have had fixed coupons to maturity. I just wouldn't call treasuries weird or quirky when fixed coupons are the textbook definition of a bond taught in school.
- dmoy 3y ago
  There are some adjustable rate treasuries even (iBonds, and TIPS). So not technically "all". But yea the vast majority of bonds (treasuries or otherwise) are not variable rate. Close enough to "all" that it seems needlessly pedantic, I agree.
  - RC_ITR 3y ago
    It feels insane to me that people haven’t heard of floating rate bonds. I guess the debt guys are too busy to hang out here. Here’s a primer from 2011. The Treasury and Feddie call theirs FRNs. https://capitalmarkets.fanniemae.com/media/1456/display https://capitalmarkets.fanniemae.com/media/1456/display
- SilasX 3y ago
  Everything in this ETF and similar has a floating interest rate: https://www.morningstar.com/etfs/bats/flot/quote https://www.morningstar.com/etfs/bats/flot/quote Please be careful about overconfidence.
- RC_ITR 3y ago
  Ever wonder what FRN stands for? They've issued them every month for the past decade. Freddie and Fannie have issued them way longer. https://home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf https://home.treasury.gov/system/files/221/Tentative-Auction... Just because you haven't heard of things doesn't mean they are not real. Like here's Freddie talking about their floating rate debt. I sort of feel like I'm taking crazy pills, or maybe its the classic Hacker News Dunning-Kruger thing. >Freddie Mac issues a variety of fixed and floating rate medium term notes (MTNs) of various sizes and maturities. https://capitalmarkets.freddiemac.com/debt/products https://capitalmarkets.freddiemac.com/debt/products
Kon-Peki 3y ago
LIBOR was a thing where banks would estimate how much they would have to pay to borrow money at a fixed rate (in London) for a short period of time. All the banks made their estimate and the average of that fixed interest rate was published as the LIBOR rate. This rate was published in financial newspapers on a periodic basis, and other loans and things started to rely on this fact to price them. If you had, for example, an adjustable-rate mortgage, the tiny print would say something like "the interest rate will change on June 1 of each year and will be the LIBOR rate published in the Wall Street Journal on the third Thursday of May, plus 4%". This allowed both sides to independently verify the rate and to estimate what it would be as the adjustment date came closer. The scandal was when it became public that multiple banks were reporting estimates that were not good faith estimates, and that some of them were tipping off traders so that they knew what direction LIBOR was going to move before it actually happened. I am not aware of any connection that LIBOR had to adjustable rate bonds
- RC_ITR 3y ago
  https://www.investor.gov/introduction-investing/investing-basics/glossary/floating-rate-bond-or-variable-or-adjustable-rate https://www.investor.gov/introduction-investing/investing-ba... Here's Freddie Mac talking about how the LIBOR scandal forced them to change their benchmark for bonds. https://freddiemac.gcs-web.com/news-releases/news-release-details/freddie-mac-cease-issuing-libor-indexed-floating-rate-unsecured https://freddiemac.gcs-web.com/news-releases/news-release-de... Ever wonder what FRN stands for? They've issued them every month for the past decade. https://home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf https://home.treasury.gov/system/files/221/Tentative-Auction... Just because you haven't heard of things doesn't mean they are not real.

Huh? There are plenty of adjustable rate bonds? That was a big part of why the LIBOR scandal was such a big deal?

by RC_ITR 3y ago

Huh? There are plenty of adjustable rate bonds? That was a big part of why the LIBOR scandal was such a big deal?

nly 3y ago

I'm not familiar with any adjustable rate bonds tbh. All corporate bonds and gilts I've ever seen have had fixed coupons to maturity. I just wouldn't call treasuries weird or quirky when fixed coupons are the textbook definition of a bond taught in school.

dmoy 3y ago
There are some adjustable rate treasuries even (iBonds, and TIPS). So not technically "all". But yea the vast majority of bonds (treasuries or otherwise) are not variable rate. Close enough to "all" that it seems needlessly pedantic, I agree.
- RC_ITR 3y ago
  It feels insane to me that people haven’t heard of floating rate bonds. I guess the debt guys are too busy to hang out here. Here’s a primer from 2011. The Treasury and Feddie call theirs FRNs. https://capitalmarkets.fanniemae.com/media/1456/display https://capitalmarkets.fanniemae.com/media/1456/display
SilasX 3y ago
Everything in this ETF and similar has a floating interest rate: https://www.morningstar.com/etfs/bats/flot/quote https://www.morningstar.com/etfs/bats/flot/quote Please be careful about overconfidence.
RC_ITR 3y ago
Ever wonder what FRN stands for? They've issued them every month for the past decade. Freddie and Fannie have issued them way longer. https://home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf https://home.treasury.gov/system/files/221/Tentative-Auction... Just because you haven't heard of things doesn't mean they are not real. Like here's Freddie talking about their floating rate debt. I sort of feel like I'm taking crazy pills, or maybe its the classic Hacker News Dunning-Kruger thing. >Freddie Mac issues a variety of fixed and floating rate medium term notes (MTNs) of various sizes and maturities. https://capitalmarkets.freddiemac.com/debt/products https://capitalmarkets.freddiemac.com/debt/products

Kon-Peki 3y ago

LIBOR was a thing where banks would estimate how much they would have to pay to borrow money at a fixed rate (in London) for a short period of time. All the banks made their estimate and the average of that fixed interest rate was published as the LIBOR rate. This rate was published in financial newspapers on a periodic basis, and other loans and things started to rely on this fact to price them. If you had, for example, an adjustable-rate mortgage, the tiny print would say something like "the interest rate will change on June 1 of each year and will be the LIBOR rate published in the Wall Street Journal on the third Thursday of May, plus 4%". This allowed both sides to independently verify the rate and to estimate what it would be as the adjustment date came closer. The scandal was when it became public that multiple banks were reporting estimates that were not good faith estimates, and that some of them were tipping off traders so that they knew what direction LIBOR was going to move before it actually happened. I am not aware of any connection that LIBOR had to adjustable rate bonds

RC_ITR 3y ago
https://www.investor.gov/introduction-investing/investing-basics/glossary/floating-rate-bond-or-variable-or-adjustable-rate https://www.investor.gov/introduction-investing/investing-ba... Here's Freddie Mac talking about how the LIBOR scandal forced them to change their benchmark for bonds. https://freddiemac.gcs-web.com/news-releases/news-release-details/freddie-mac-cease-issuing-libor-indexed-floating-rate-unsecured https://freddiemac.gcs-web.com/news-releases/news-release-de... Ever wonder what FRN stands for? They've issued them every month for the past decade. https://home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf https://home.treasury.gov/system/files/221/Tentative-Auction... Just because you haven't heard of things doesn't mean they are not real.