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Thursday, November 25, 2010

IRS motivation, again

For an issuer to borrow $100M, the floating rate is typically lower than the fixed rate that's available from a regular bond issue.

Some "fixed" bond issuers actually want a floating interest cost, which is typically cheaper. IRS is a simpler route than the VRDO with the remarketing agent and letter of credit.

"Major issuers evaluate the swap market and the bond market side by side" as 2 alternatives.

Cast of characters
* issuer, like IBM
* swap provider, like GS
* investor, like grandma.