A floating-rate (or variable-rate) debenture is a municipal debt instrument where the interest rate adjusts periodically based on a reference rate like the prime rate or a government bond yield. Unlike fixed-rate debentures with constant payments, floating-rate debt creates uncertainty in debt servicing costs—payments decrease when rates fall but increase when rates rise. Floating-rate debt may offer initially lower rates than fixed-rate alternatives but exposes the municipality to interest rate risk. Some municipalities use floating-rate debt for short-term needs or when they expect rates to decline. Risk management might involve interest rate swaps that convert floating rates to fixed rates. Most Canadian municipalities prefer fixed-rate debentures for their predictability, though floating-rate instruments may be appropriate for specific circumstances or as part of a diversified debt portfolio.