Volatile rates picture boosts FRN allure

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Volatile rates picture boosts FRN allure

The sharp rise in Bund yields has caused huge mark-to-market losses, effectively wiping out the lifetime coupon payments of any seven to 10 year fixed rate covered bonds bought in recent weeks. Markets appear to have temporarily stabilised, but underlying uncertainty may temper demand for fixed rate bonds suggesting the floating rate market could offer a better alternative.

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