Floating-Rate Bonds Revisited: The New 'Old Maid?'

4 Pages Posted: 20 Dec 2015

Date Written: February 1, 2015

Abstract

In “Old Maid,” the kids’ card game, the loser was left holding the lone “Old Maid” card. Today, investors holding floating rate bonds (FRBs) or FRB funds may end up in a similar situation – unable to “discard” potentially illiquid bonds as they lose value.

Last year, an article from the Brandes Institute, “Floating Rate Bonds: Switching One Risk for Others,” showed these instruments carry risks that could potentially outweigh their rewards. This follow-up piece, featuring insights from Brandes Fixed Income Portfolio Manager/Analyst Timothy Doyle, CFA and other sources, seeks to expand on the FRB risk discussion, focusing on liquidity and credit risks.

Keywords: floating rate bonds, collateralized loan obligations, liquidity risk, credit risk

JEL Classification: G10, G11, G14, G15, G20, G22, G23, G30

Suggested Citation

Institute, Brandes, Floating-Rate Bonds Revisited: The New 'Old Maid?' (February 1, 2015). Brandes Institute Research Paper No. 2015-02. Available at SSRN: https://ssrn.com/abstract=2705895 or http://dx.doi.org/10.2139/ssrn.2705895

Brandes Institute (Contact Author)

Brandes Investment Partners ( email )

11988 El Camino Real, Suite 500
P.O. Box 919048
San Diego, CA 92191-9048
United States

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