Skip to main content

Percy Rosenberger, BA, CIM

  •  Tel: 604 443 5431
  •  

John Hancock, BA

  •  Tel: 604 443 5425
  •  

  • Home
  • About
  • Services
  • Products 
    • Bonds
    • Notes
    • Preferred Shares
    • GICs
  • Contact

Proactive Planning

for a solid future

    You are here

  1. Home
  2. Products
  3. Notes
  4. Collared Floating Rate Notes or “CRAN”

Collared Floating Rate Notes or “CRAN”

A Collared Floating Rate Note is similar to a traditional floating rate bond, but provides the investor with a minimum and maximum coupon rate. Coupons are based on a reference rate, typically the 3-month Bankers’ Acceptance (BA) or London Interbank Offered Rate (LIBOR). The cap rate is the maximum rate to be used for the calculation of interest, even if the reference rate is above the maximum. The floor represents the minimum coupon rate to be used for the calculation of interest, even if the reference rate is below the minimum. The investor will be protected for 100% of principal if the note is held to maturity.

Investor Rationale: Collared Floating Rate Notes protect investors against downside risk and pay a steady coupon payment.

Investor Profile: Clients should expect that interest rates are on the rise, but are unlikely to go above the cap level. If you seek a guaranteed minimum coupon payment, and a coupon that resets to the current short-term market rate within the collar rate range, Collared Floating Rate Notes can be a suitable investment.

 

Advantages:

  • Simple structure
  • Minimum Coupon payment
  • Increasing Coupon if the reference rate increases
  • Less price sensitivity in the secondary market when compared to fixed rate bonds
  • Liquidity in daily secondary market / early redemption penalties

Risks:

  • Yield is capped at the ceiling (investor will miss out on rates above the upper bound of the cap during a rising interest rate environment)
  • Credit Risk of issuer

Products

  • Bonds
  • Notes
    • Accrual Notes, Extendible
    • Extendible Step-up Notes
    • Extendible Daily Range Accrual Notes or Fixed Floor Range Note
    • Collared Floating Rate Notes or “CRAN”
    • Principal Protected Note (PPN
  • Preferred Shares
  • GICs

Book a Complimentary Consultation

Tell a Friend

Percy Rosenberger, BA, CIM

Phone: 604 443 5431
prosenberger@pifinancial.com

 

John Hancock, BA

Phone: 604 443 5425
jhancock@pifinancial.com

 

PI Financial Corp. is licensed as a broker-dealer in all provinces and territories of Canada and is a member of the IIROC and the Canadian Investor Protection Fund. The contents of our Website are not intended, and should not be construed, as a solicitation of customers or business in any jurisdiction in which we are not registered as a dealer in securities.

© 2021 The Fixed Income Group. All rights reserved.

Website Design For Financial Services Professionals