Hungary just issued a bond that matures in 2024, pays once a year and has the coupon rate of "1-year treasury bill rate" + 2.5%.
I searched for information on the net how does market sets price on floating rate bonds, and they said the price returns to par after each coupon payment.
Currently the yield difference of the 1 yr and 10 yr bonds is about 2.5%. So it makes sense it's traded on par value. But this spread is constant so as we get closer to the maturity date, I would expect that the price gradually goes up. Imagine the beginning of the last coupon period in 2023: the bond must be traded on premium so the yield of the 1yr bond and the FRN exactly match.
So how does floating rate bond pricing work?