Negative Interest Rates v Coca-Cola's Floating Rate Bond

     Last November, The Coca-Cola Company (Coke) issued a bond maturing in 2019 with coupons paying 0.15% over something called the three month Euro Interbank Offered Rate (Euribor).  The June 9 coupon payment gets calculated today.  Were this money amount based on the 0.15% factor, as stipulated, with the Euribor yielding -0.221% now, bondholders would have to pay Coke .071% on June 9.  (We assume all rates to be annual, later reduced to interims in coming up with appropriate money amounts).

     Fortunately, Reuters tells us, Coke has placed a floor of 0.0% on said factor, removing their 2019 bond issue from negative interest rate status, so bondholders will simply receive nothing this time instead of having to make a payment to the company.

     Not all bonds, floating rate or otherwise, carry such protection, however, and we get the impression that fixed income markets are getting weirder and weirder out there as more central banks force negative interest rates on captive investors and existing negative rates keep heading deeper and deeper into depravity, but other than suggesting subscribers exercise extreme caution when entering bizarroland, we don't know what to tell you.

     There's no road map for what's going on out there or where we're headed in it.