Floating Rate Bonds Explained: How the FRB 2034 Coupon Resets Every Six Months
Most bonds pay the same coupon every year until they mature. A floating rate bond is different: its interest rate is linked to a benchmark and is reset at fixed intervals. The Government of India Floating Rate Bond 2034 (FRB 2034) is a good example, because the Reserve Bank of India (RBI) publishes its new rate before every half year. This explainer uses only RBI press releases, the latest dated 29 October 2026.
Fixed coupon vs floating coupon
Point | Fixed rate bond | Floating rate bond |
|---|---|---|
Coupon | Set once at issue | Reset at fixed intervals |
Linked to | Nothing after issue | A benchmark rate |
FRB 2034 | Not applicable | Reset every half year |
The FRB 2034 formula, in two parts
RBI describes the coupon the same way in each press release:
Base rate: the average of the Weighted Average Yield (WAY) of the last three auctions of 182-day Treasury Bills, counted back from the rate fixing day.
Fixed spread: 0.98 per cent, which stays the same for the life of the formula.
So the coupon for a half year is simply the base rate plus 0.98 per cent. When 182-day T-Bill yields rise, the base rate rises and so does the coupon. When those yields fall, the coupon falls too.
Worked example: the last two resets
Half year | Rate (p.a.) | Base rate (our calculation) |
|---|---|---|
30 Apr 2026 to 29 Oct 2026 | 6.45% | 5.47% |
30 Oct 2026 to 29 Apr 2027 | 7.26% | 6.28% |
The rates are from RBI Press Releases 2026-2027/174 and 2026-2027/1405. The base rate column is worked out by subtracting the 0.98 per cent spread from each rate. Between the two half years the coupon moved up by 0.81 percentage points, all of it from a higher base rate, because the spread did not change.
What a 182-day T-Bill auction tells you
RBI auctions 182-day T-Bills regularly and publishes the result. In the auction result dated 28 October 2026 (Press Release 2026-2027/1398), the 182-day T-Bill cut-off yield was 6.5493%, with ₹8,000 crore notified and accepted. A single auction's cut-off yield is not the same thing as the weighted average yield used in the FRB formula, and the formula takes three auctions, so this figure will not match the base rate exactly. It is still a useful way to see which direction short-term government yields are moving. Our explainer on how Treasury Bills work walks through that auction in more detail.
A simple way to read the number
Take a face value of ₹1,00,000 as an illustration. At 7.26 per cent per annum, the annual rate works out to ₹7,260, or roughly half of that for a six-month period (our calculation, before tax and ignoring day-count details). For the earlier half year at 6.45 per cent, the same illustration gives ₹6,450 a year. The point is only to show how the reset changes the interest amount; actual payments depend on the terms of the holding.
Things to keep in mind
The 7.26 per cent rate applies only to 30 October 2026 to 29 April 2027. RBI announces a new rate for each half year.
A floating coupon can go down as well as up. Only the 0.98 per cent spread is fixed.
If you hold FRB 2034 through a bank, broker or platform, that is the place to check payment dates and holding details.
FAQ
What is a floating rate bond?
It is a bond whose interest rate is linked to a benchmark and reset at fixed intervals, instead of staying the same until maturity.
How is the FRB 2034 coupon calculated?
RBI uses the average Weighted Average Yield of the last three 182-day T-Bill auctions before the rate fixing day, plus a fixed spread of 0.98 per cent.
What is the FRB 2034 rate from 30 October 2026?
RBI Press Release 2026-2027/1405 dated 29 October 2026 sets it at 7.26 per cent per annum for 30 October 2026 to 29 April 2027.
Can the FRB 2034 coupon fall?
Yes. If 182-day T-Bill yields fall, the base rate falls and the next half-year coupon will be lower. Only the spread stays fixed.
Sources
About the author: Nishi Jain is a full-time trader in Jaipur and ex-JioBlackRock.
Disclaimer: Education-only explainer. Not investment advice. No bond or security recommendation is made here. Please read RBI's official releases and consult a SEBI-registered adviser before investing.
