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Base rate

Asset-Backed Securities glossary · Collateral & Cash Flow Modeling

Definition

In credit card ABS, the sum of bond coupons and servicing fees expressed as an annual rate on principal; a key input to excess spread.

Base rate in plain English

In credit-card-backed bonds, the 'base rate' is basically the yearly cost of running the deal — the interest owed to bondholders plus the fee paid to whoever services the accounts — written as a percentage of the loan balance. It matters because you compare it to what the credit-card borrowers are actually paying in interest; whatever's left over is the cushion ('excess spread') that protects investors. Think of it as the rent plus utilities on a shop: you need your sales to beat that number, and the gap is your safety margin.

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Practice Base rate

What is the series' current excess spread?

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