Margin

Margin is one of the constituent parts of the formula for determining the coupon rate for securities with a floating coupon rate, or, in other words, a fixed part of a floating rate. The margin can be added to or subtracted from the reference rate. Very occasionally there are bonds from which the reference rate is deducted from the margin.

The margin is expressed in percentage or basis points and can be fixed throughout the bond’s life or change.

An example of a fixed margin bond: Unicredit Bank Czech Republic and Slovakia, FRN 15jun2027, EUR (XS2188802404). The coupon rate for this bond is calculated using the formula: 3m EURIBOR + 0.44%. In this case, the margin is 0.44% over the entire circulation period of the security.

An example of a bond where the margin is different in different coupon periods: China Jinmao Holdings Group, 4.875% perp., USD (XS1709294380). The coupon rate for this bond is calculated using the formula: 4.875% until 11/06/2023, 5Y UST Yield + 2.75% from 11/06/2023 to 11/06/2028, 5Y UST Yield + 3% from 11/06/2028 to 11/06/2032, 5Y UST Yield + 3.75% starting from 11/06/2032. Here, at first the coupon is fixed, then floating, and the margin changes accordingly from 2.75% to 3.75% in different periods of coupon payment.

You can see information regarding the margin on the bonds page in the “Cash flow parameters” block. For example, the Asian Development Bank (ADB), FRN 12oct2023, GBP (XS1891423078) issue margin is of 0.25%.