Variable interest bond issue, what is the correct setup for daily reset of interest?

[lisa_savinovich]

Dear Treasury Experts,

We have a variable interest rate bond issue (product category 40/product type 04Y) for the nominal amount of $11,665,000 with a start date of 06/22/2023 and end of term 08/15/2034 (or 4,072 days of interest). The interest rate changes daily, pays monthly the day following month end, and we are using a reference interest rate. The struggle that I am having is that that one interest rate condition does not seem to cause the system to recognize the daily change (I have used FWUP) in interest rates and need your help to understand if the interest condition setup is wrong.

Initial setup/test is below but the interest amount calculated for 9 days is $8,916.53 and not the expected amount which is $8,980.49 based on the rates entered for each of the 9 days (see daily rates below):

IF I alter the setup to have a DAILY condition, it works. But that is burdensome for the life of this bond which will have 4072 days of interest. Is there another way to more efficiently handle a daily change in interest rate?

Thank you,

Lisa

[lisa_savinovich]

Hello All,

I found a post that was helpful and believe now it is the interest rate adjustment condition that needs attention. I setup the interest adjustment condition below and got close but I expected the June calculation to include 6/22/2023 but it is starting from 06/23/2023. Thoughts on what I need to do to get 9 days versus 8 days?

Thank you,

Lisa

[lisa_savinovich]

Hello All,

I believe I found the correct setup for the interest rate adjustment condition (see images below). However, in reviewing the interest posting via FWSO for the first interest payment on 7/1/2023, I see daily payment amounts (see sample in the test run image). Is there a way to get the payment to summarize into one payment for the month rather than individual daily amounts all paying on the same day?

Thank you,

Lisa

[lisa_savinovich]

With respect to my post of the 8 versus 9 days above, it was due to the +1 Calendar Days versus 0 Calendar Days and the interest rate adjustment condition should have instead looked like this one. This gives me the calculation that I expected. I am still struggling with daily amounts showing in FWSO and do not understand why if they have a monthly payment frequency that the payment amounts are not grouped for that month.

Thank you,

Lisa