Matt Levine, Columnist

Strategy Does a Stretch

Also Tesla and xAI, alpha capture and an NFT treasury company.

July 24, 2025 at 5:29 PM UTC

Matt Levine is a Bloomberg Opinion columnist. A former investment banker at Goldman Sachs, he was a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals for the 3rd Circuit; and an editor of Dealbreaker.

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A fixed-rate bond has interest-rate risk. If you buy a five-year $100 bond that pays interest of 8%, and then interest rates go up by one percentage point, your bond is only worth $96. As rates go up, the yield of your bond has to go up, and to make the yield go up the price has to drop.

A floating-rate bond has, to a first approximation, no interest-rate risk. If you buy a five-year $100 bond that pays interest of SOFR (the Secured Overnight Financing Rate, a standard interest benchmark) plus 4%, then today it pays 8.28% interest (SOFR is 4.28%); if SOFR goes up by one percentage point, then the bond pays 9.28% and it’s probably still worth about $100. As rates go up, the yield of your bond goes up (it pays more interest), so the price doesn’t have to drop.