FRB 2031 is a floating-rate government security whose coupon rate is reset periodically based on prevailing market conditions. Unlike fixed-rate bonds, the interest payable on these securities changes in line with a benchmark rate.
The coupon on FRB 2031 is linked to the average weighted average yield of the last three auctions of 182-day Treasury Bills preceding the rate-reset date. A fixed spread of 1 percentage point is added to this benchmark yield to determine the applicable coupon rate.
For the upcoming six-month period, this formula has resulted in an annual interest rate of 6.64%.
Floating Rate Bonds are government securities that help investors benefit from changes in interest rates, as their coupon payments are periodically adjusted rather than remaining fixed throughout the tenure of the bond. Treasury Bill yields, which serve as the benchmark for these bonds, generally reflect short-term interest rate expectations and liquidity conditions in the market.
The FRB 2031 bond is scheduled to mature in 2031 and forms part of the government’s market borrowing programme. The revised coupon rate will remain applicable until the next reset date in December 2026.
