Let’s first revisit what is QM and DM:

What QM and DM Represent:

• Quoted Margin (QM): This is the margin that the issuer of the FRN

Let’s first revisit what is QM and DM:

What QM and DM Represent:

• Quoted Margin (QM): This is the margin that the issuer of the FRN promises to pay above the reference rate (e.g., LIBOR or SOFR). – Like Coupon in fixed rate bond.
• Discount Margin (DM): This is the margin that investors require or expect above the reference rate, based on the market’s perception of risk, creditworthiness, and liquidity. (like Yield or more appropriately current spread). So SOFR + DM = Current YTM.

So, DM is more like the current market yield (when added with benchmark rate) and QM is like the coupon. so, if QM is lesser than DM then an analogy with fixed rate bonds is that Coupons is lesser than Yield which would make it trade at a discount.