Is Now a Good Time for Floating Rate Notes?

Srinivasan Margabandu,

Fixed Income Portfolio Specialist

  • Higher yields are increasingly likely with steeper government bond curves expected in 2022, leading to potential underperformance of fixed rate bonds.
  • Australian markets pricing in earlier hikes and central banks have changed stances quickly, leading to spikes in bond volatility.
  • Floating Rate Notes (FRNs) provide enhanced income compared to cash/short term deposits, are a good way to access lower volatility income than fixed rate equivalents and credit fundamentals of banks, which mostly issue FRNs, have been robust.