In addition to fixed-interest bonds, there are some other types of fixed-income securities available on the market, including floating-rate bonds and indexed notes.
A floating-rate bond, also called a floating-rate note, is similar to a fixed-interest bond in that it usually has a fixed maturity date, however the interest rate coupon that is paid for each period fluctuates (or “floats”) relative to a benchmark interest rate. The benchmark interest rate is usually the 90 day bank bill rate, the wholesale rate at which the major banks will lend to the most credit worthy major corporate. The 90 day bank bill rate is also sometimes described as the BBSW (standing for Bank Bill Swap Rate).
When floating rate notes are issued, the interest coupon is fixed as a margin to the benchmark rate (usually the 90 day bank bill rate). While the margin remains fixed throughout the duration of the note, the underlying rate floats, meaning that the interest coupon received every 90 days varies.