Glossary of Municipal Securities Terms

FLOATING-TO-FIXED RATE SWAP

An agreement whereby an issuer synthetically converts variable rate debt to fixed rate debt through an interest rate swap or similar arrangement. In this process, the issuer makes payments to the counterparty at a fixed rate according to the terms of the swap and the counterparty makes payments on a variable rate or rates according to the terms of the swap, which may be equivalent to the rates payable to bondholders under the bond contract. See: INTEREST RATE SWAP CONTRACT. Compare: FIXED-TO-FLOATING RATE SWAP.

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