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Decoding Interest Rates: How Student Loan Aprs Impact Borrowers – Interest rate swaps are popular over-the-counter (OTC) financial instruments that allow fixed payments to be exchanged for variable payments – often linked to the London Interbank Offered Rate (LIBOR). Businesses around the world are engaging in interest rate swaps to mitigate the risks of fluctuating interest rates or to take advantage of lower interest rates. We explain how to read interest rate swap offers.
Multiple websites offer offers for interest rate swaps. Here is a sample proposal for a 10-year interest rate swap:
Decoding Interest Rates: How Student Loan Aprs Impact Borrowers
Details provided in the quotation include standard opening, high, low and closing values based on daily trading. Note that the unit of interest rate swap offers are percentages that represent the annual interest rate. Therefore, a value of 1.96 actually means an annual interest rate of 1.96%. When applying this quarterly or semi-annually, this ratio needs to be scaled down to match the duration.
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All values that show percentage change figures (such as % Change from Previous Close or % Change from 52-week high/low) should be scrutinized. 1.51% This is a percentage change = (last value/previous value -1)*100% = (1.96/1.99-1)*100% = -1.51%. This is no simple subtraction. Because we are comparing percentage values, the reported percentage change is actually a percentage.
Depending on the details covered by individual data providers, there may be additional fields such as the standard deviation and the 100-day average of quotation values.
The most important fields that an interested market participant looks for in a quote are the buy and sell values. These are the values at which the trade or transaction takes place.
To understand interest rate swap prices, let’s say a company’s CFO needs $500 million in capital for a 10-year period. They can borrow money or issue securities such as promissory notes to obtain the necessary capital. They prefer a fixed rate loan to hedge against any intermittent increases in variable interest rates, but currently only have the option to issue floating rate bonds.
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They decide to issue a floating rate note of LIBOR plus 100 basis points and sign a fixed payment/floating rate swap agreement to hedge floating interest rates.
Assume the above rates are semi-annual rates on an actual/365 basis versus semi-annual LIBOR rates (as defined by the dealer).
The CFO will fall into the first category of “pay fixed get variable” swap for their needs. They will receive the LIBOR rate from the dealer and pay the dealer 2.2% on the nominal amount of $500 million. The variable rate note issued will pay LIBOR+1% to the holders. Effective net debt = +LIBOR – 2.2% – (LIBOR +1%) = -3.2% (negative indicates amount payable).
Alternatively, interest rate swap quotes may be available in terms of clearing margin. However, it should be noted that the swap spread on an interest rate swap quote is NOT the buy-sell spread of swap quote values. It is the differential amount that must be added to the yield of a risk-free Treasury instrument with a similar maturity. For example, let’s say a 10-year Treasury Bill offers a yield of 4.6%. The final price of a 10-year interest rate swap with a 0.2% swap margin would actually mean 4.6% + 0.2% = 4.8%.
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Interest rate swap quotes are different from standard price quotes for commonly traded instruments. They can seem confusing as quotes are effectively interest rates, quotes can be provided as clearing margins, and quotes can follow local OTC market customs. Market participants should do their due diligence to understand quotes before entering into swap contracts.
The offers appearing in this table are from companies receiving compensation. This compensation can affect how and where listings appear. does not include all offers available in the market. This is to let you know that by clicking the link you will leave us/inside and enter a website operated by other parties:
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Use of such websites is subject to the terms of use and, if any, other terms and guidelines contained in each such website. In the event that any of the terms contained herein conflict with the terms of use or other terms and guidelines contained in such a website, the terms of use and other terms and guidelines for such website shall prevail.
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Find out what the different parts of your credit card statement mean and how you can benefit from them.
Tracking your credit card information directly affects your credit ore. To better manage your credit, a good understanding of the credit card statement is absolutely essential. On the statement sent to your inbox monthly, you’ll find details of your credit card charges, refunds, and fees. However, many people find reading phrases quite confusing due to several complex components. In order for you to understand them better, we have listed some basic features that you should pay attention to when reading your credit card statement:
On most credit card statements, the period of the report is indicated in the upper right corner. You can find out the number of interest-free days and duration of your credit card here. Interest-free days refer to the time allotted to you in your credit card’s billing cycle and free of interest for purchases. With the accumulation of knowledge, it is possible to purchase products with a credit card without paying interest.
The due date when you must make at least the minimum payment is also usually indicated in the upper right corner of the statement. You are free to make the payment before the due date, but failure to pay after the due date will incur a late penalty and interest on the outstanding amount.
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This is the minimum amount you have to pay per month to avoid default. Delay or late payment may adversely affect your credit history, and your bank may penalize you with late interest and delay penalties, depending on the duration, type and cause of the default.
The minimum amount to be paid may vary each month depending on the purchases you make with a credit card. It is approximately 5% of the total outstanding balance. However, this amount may vary from bank to bank. Paying less than the minimum amount can result in fines. However, it is recommended that you pay as much as possible above the minimum balance.
If you haven’t paid the minimum amount for a month or more, the total amount you have to pay will be reflected in the “late” section of your credit card statement. The longer the overdue account expires, the higher the late fee charged. It also negatively impacts your credit ore, which may affect your future credit card or loan requests.
This is the total amount you owe the credit card account. If you pay more than you owe, the number should be negative, which means that this amount will be reset the next time you make a credit card purchase. Paying the full amount each month has many advantages, such as avoiding paying interest on the balance amount (total – minimum amount) and enjoying more interest-free days for future purchases, among others.
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Apart from these, there are other important sections that you should follow closely. These include payments/refunds, new charges, transactions, daily rates, reward points, etc. contains sections. This will give you a clear idea of your overall credit card record. Standard Chartered gives you the freedom to access credit card statements for up to 2 years. It also allows for easy and secure online credit card payment. Click to make your credit card payments now! Click here to select the Standard Chartered credit card.
Credit Card Statement image shown on this page is for illustrative purposes only and may differ from the actual Credit Card Statement
The views expressed in the article are those of Standard Chartered Bank (“B”) and do not constitute financial, professional or other advice. In no event shall B, including its Directors, Officers, or Employees, be liable for any damage or injury arising solely from your reliance on any information provided herein. Each bank/financial institution will have its own processes/fees/expenses and the information contained in this Article is indicative only. Before relying on any information or opinions expressed in this Article, we ask that you take all necessary steps to verify their accuracy. The information contained in this Article is indicative only. Each Standard Chartered Bank Product has its own terms and conditions and must be cited as a whole. We invite you to visit “/in” or visit your nearest Standard Chartered Bank.
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