Key question
What is the optimal fixed-floating composition and duration for our debt portfolio?
Monitor the cost of rate fixing
The swap premium — the difference between the fixed swap rate and realized floating rate over the same tenor — measures what each fixing decision has cost relative to floating.
Find the optimal structure for today's rate environment
Alternative portfolios with different fixed/floating ratios and duration profiles are compared to identify structures that reduce overpayment without increasing earnings risk.
↑ Potential overpayment (%/yr)
| Tenor | Fixed (EUR m) | Floating (EUR m) |
|---|---|---|
| 5Y | demo | demo |
| 6Y | demo | demo |
| 7Y | demo | demo |
| 8Y | demo | demo |
| 11Y | demo | demo |
| 15Y | demo | demo |
demo+ add tenor | ||
| Total | 2400 EUR m | 600 EUR m |
Debt Structure by Tenor (EUR millions)
80%
fixed debt ratio
7.6 yrs
avg. fixed duration
Cost of Rate Fixing
The swap premium measures what fixed-rate debt cost relative to floating — averaged across the portfolio's tenors and fixing dates.
Potential overpayment from fixed debt
+1.71%/yr
vs. all-floating debt
Potential overpayment in absolute terms
~41 EUR m/year
vs. all-floating debt
Rate Fixing and Earnings Risk
Reducing the fixed proportion from 80% to 23% changes PBT volatility by less than 3% — earnings risk is dominated by business risk, not interest rates.
EBITDA annualised volatility
62%
dominates total earnings risk
IC annualised volatility (100% floating)
27%
interest rate risk is secondary
The Value of Timing
If optimal fix/unfix timing had been known in advance, savings of ~0.69%/yr vs. floating were achievable — a natural benchmark for any active strategy.
Current portfolio swap premium
+1.71%/yr
vs. all-floating
Perfect hindsight saving
−0.69%/yr
theoretical ceiling of timing
Alternative Structures
Reducing duration or the fixed proportion to ~23% both cut potential overpayment from 1.71% to 0.48%/yr — without changing the credit spread component.
Potential overpayment · current portfolio
+1.71%/yr
vs. all-floating
Potential overpayment · reduced duration (A)
+0.48%/yr
duration 7.6 → 1.9 yrs
Potential overpayment · reduced fixed (B)
+0.48%/yr
fixed 80% → 23%
Cost Under Annual Rollover
With annual refinancing of maturing fixed debt, realized interest costs vary year to year even under a fixed-rate policy — the analysis below maps 59,000 possible tenor allocations along two dimensions: overpayment and cost variability.
Current portfolio
Reduced duration
Demo is based on historical data. In the full version — current data, your currency, your company's portfolio.