coupon bond: meaning, definition, pronunciation and examples
C2Finance, Business, Economics, Investment
Quick answer
What does “coupon bond” mean?
A debt security, usually issued by a government or corporation, that pays fixed interest to the holder at regular intervals. The interest payments are made by redeeming attached coupons, which can be physical or electronic.
Audio
Pronunciation
Definition
Meaning and Definition
A debt security, usually issued by a government or corporation, that pays fixed interest to the holder at regular intervals. The interest payments are made by redeeming attached coupons, which can be physical or electronic.
Historically, a bond with physical coupons that the holder would detach and present to receive interest payments. In modern usage, it refers more broadly to any bond paying periodic interest (coupons), as opposed to a zero-coupon bond which pays no periodic interest. It is synonymous with the term "bearer bond" in some historical contexts, though modern coupon bonds are typically registered.
Dialectal Variation
British vs American Usage
Differences
No significant difference in meaning. Spelling conventions follow standard UK/US patterns (e.g., 'organisation' vs. 'organization' in surrounding text). The term is used identically in financial contexts.
Connotations
Neutral technical term in both varieties.
Frequency
Equally frequent in professional financial discourse in both the UK and US.
Grammar
How to Use “coupon bond” in a Sentence
The [ENTITY] issued a coupon bond.Investors purchased [NUMBER] coupon bonds.The coupon bond pays [INTEREST RATE].Vocabulary
Collocations
Examples
Examples of “coupon bond” in a Sentence
verb
British English
- The treasury will coupon the bond semi-annually.
- The bond coupons on the first of January and July.
American English
- The bond coupons twice a year.
- They coupon the interest payments electronically.
adjective
British English
- The coupon-bond market was particularly active.
- They favoured a coupon-bond investment strategy.
American English
- The coupon-bond market was particularly active.
- He analyzed the coupon-bond characteristics.
Usage
Meaning in Context
Business
The company financed its expansion by issuing a ten-year coupon bond.
Academic
The study compared the volatility of coupon bonds versus zero-coupon bonds in a rising rate environment.
Everyday
My grandfather left me some old coupon bonds in his safe deposit box.
Technical
The bond's duration is calculated differently for a coupon bond than for a zero.
Vocabulary
Synonyms of “coupon bond”
Strong
Neutral
Weak
Vocabulary
Antonyms of “coupon bond”
Watch out
Common Mistakes When Using “coupon bond”
- Using 'coupon bond' to refer to a bond bought with a discount voucher (incorrect).
- Confusing 'coupon rate' (the interest rate) with the bond's current yield.
FAQ
Frequently Asked Questions
Historically, many coupon bonds were bearer bonds, meaning whoever physically held them owned them. However, modern coupon bonds are typically registered to an owner. The terms are not perfectly synonymous today.
Almost never in modern markets. The term 'coupon' now refers electronically to the stated interest rate and payment schedule. All transactions and payments are handled digitally.
Generally, the market price of an existing coupon bond will fall. This is because new bonds will be issued with higher coupon rates, making the older, lower-paying bond less attractive to buyers.
For a standard (plain vanilla) coupon bond, the coupon rate is fixed for its entire life. However, there are other types like floating-rate notes (FRNs) where the coupon changes based on a reference interest rate.
A debt security, usually issued by a government or corporation, that pays fixed interest to the holder at regular intervals. The interest payments are made by redeeming attached coupons, which can be physical or electronic.
Coupon bond is usually finance, business, economics, investment in register.
Coupon bond: in British English it is pronounced /ˈkuːpɒn bɒnd/, and in American English it is pronounced /ˈkuːpɑːn bɑːnd/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “clipping coupons (historical idiom referring to collecting bond interest)”
Learning
Memory Aids
Mnemonic
Think of a coupon you clip from a newspaper to get a discount. A coupon bond has 'coupons' you (or your bank) 'clip' electronically to get regular interest payments.
Conceptual Metaphor
FINANCIAL INSTRUMENT AS A SOURCE OF INCOME (a bond is a 'cow' that produces 'milk' in the form of coupon payments).
Practice
Quiz
What is the primary characteristic that distinguishes a coupon bond from a zero-coupon bond?