When you set up a floating rate or inverse floater type security, you specify a Coupon Type value of Floating Rate or Inverse Floating Rate. You use the Floating Rate Information fields to define the rate reset criteria.
How Eagle Accounting Uses Floating Rate Information
Eagle Accounting begins using the Dated Date Rate of the underlying index plus any applicable index offset, from the period from Dated Date to the First Rate Reset. Floating Rates and Inverse Floating Rate securities do not automatically change to a new rate when that rate becomes available (based upon the underlying security's security alias in the Variable Rate table) instead, rate changes are based on dates in the rate reset array, which are created using the first Rate Reset Date, Reset Frequency, Business Calendar, and the Business Day Convention. Note that contrary to the coupon reference data used to build the regular coupon array, there is no last rate reset date available.
Also note that the Business Calendar field is available for all securities, not just Inverse Floaters/Floating Rates and is required when you select a Business Day Convention or Day of Month Override field based on Business Day.
For Floating Rate Coupon Type or Inverse Floating Rate Coupon Type securities:
- When you select a Coupon Type of Floating Rate, the Coupon Rate field (tag 70) on the SMF is then only used for reporting, and no processing is done with that field.
- Eagle Accounting does not support the setup of Floating Rate TIPS or Convertible bonds with a Floating Rate Coupon Type. There is a conflict between the primary and underlying security master files, specifically the Index Offset, and Convertible Ratio fields. Therefore, Floating Rate TIPS and Convertible Bond securities should be set up as Variable Rate securities.
The rate reset process also uses the Business Calendar Name and Business Day Convention, described in About Coupon Period Fields. It uses the Business Day Convention (tag 1536) to create rate reset schedules and is used when a payment date is scheduled for a non-business day. If for example, a rate reset schedule is expected on the 22nd of the month but the 22nd falls on a Saturday, using Following Business Day Adjust, the rate reset schedule is set to the 24th for that coupon period and Rate Reset Date.
The following figure shows the Floating Rate Information fields that the system uses for rate resets. It shows a section of Issue Viewer's Long Term Debt panel.
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