“These investment-grade bonds, issued primarily by corporations, have coupons that periodically reset using a short-term interest rate and typically have maturity dates ranging from 18 months to five years. Most floating rate notes pay coupons quarterly, but a few pay monthly,” according to BlackRock.
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This year, FRN ETFs have been popular with investors. FLOT has seen year-to-date inflows of $3.56 billion, the third-best inflows total among all US-listed bond ETFs.
“FRNs offer access to corporate debt, which may generate more income than a similar maturity U.S. government bond. However, U.S. government bonds are generally considered to have less credit risk,” according to BlackRock.
For more on the bond market, visit our Fixed Income Channel.