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Coupon payments

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Definition of Coupon payments

Coupon Payments Image 1

Coupon payments

A bond's interest payments.



Related Terms:

Level-coupon bond

Bond with a stream of coupon payments that are the same throughout the life of the bond.


Payment-In-Kind (PIK)

bond A bond that gives the issuer an option (during an initial period) either to make
coupon payments in cash or in the form of additional bonds.


Realized compound yield

Yield assuming that coupon payments are invested at the going market interest
rate at the time of their receipt and rolled over until the bond matures.


Treasury bond

Long-term debt obligation of the U.S. government that makes
coupon payments semi-annually and is sold at or near par value in $1000
denominations or higher. Face value is paid at maturity.


Yield

a. Measure of return on an investment, stated as a percentage of price.
Yield can be computed by dividing return by purchase price, current market
value, or other measure of value.
b. Income from a bond expressed as an
annualized percentage rate.
c. The nominal annual interest rate that gives a
future value of the purchase price equal to the redemption value of the security.
Any coupon payments determine part of that yield.



current yield

Annual coupon payments divided by bond price.


Balance of payments

A statistical compilation formulated by a sovereign nation of all economic transactions
between residents of that nation and residents of all other nations during a stipulated period of time, usually a
calendar year.


Coupon Payments Image 2

Clearing House Automated Payments System (CHAPS)

A computerized clearing system for sterling funds
that began operations in 1984. It includes 14 member banks, nearly 450 participating banks, and is one of the
clearing companies within the structure of the Association for Payment Clearing Services (APACS).


Clearing House Interbank Payments System (CHIPS)

An international wire transfer system for high-value
payments operated by a group of major banks.


Coupon

The periodic interest payment made to the bondholders during the life of the bond.


Coupon equivalent yield

True interest cost expressed on the basis of a 365-day year.


Coupon rate

In bonds, notes or other fixed income securities, the stated percentage rate of interest, usually
paid twice a year.


Current coupon

A bond selling at or close to par, that is, a bond with a coupon close to the yields currently
offered on new bonds of a similar maturity and credit risk.


Current-coupon issues

Related: Benchmark issues


Full coupon bond

A bond with a coupon equal to the going market rate, thereby, the bond is selling at par.


High-coupon bond refunding

Refunding of a high-coupon bond with a new, lower coupon bond.


Interest payments

Contractual debt payments based on the coupon rate of interest and the principal amount.


Lag response of prepayments

There is typically a lag of about three months between the time the weighted
average coupon of an MBS pool has crossed the threshold for refinancing and an acceleration in prepayment
speed is observed.



Long coupons

1) Bonds or notes with a long current maturity.
2) A bond on which one of the coupon periods, usually the first, is longer than the other periods or the standard period.


Low-coupon bond refunding

Refunding of a low coupon bond with a new, higher coupon bond.


Long coupons

1) Bonds or notes with a long current maturity.
2) A bond on which one of the coupon
periods, usually the first, is longer than the other periods or the standard period.


Pass-through coupon rate

The interest rate paid on a securitized pool of assets, which is less than the rate
paid on the underlying loans by an amount equal to the servicing and guaranteeing fees.


Payments netting

Reducing fund transfers between affiliates to only a netted amount. Netting can be done on
a bilateral basis (between pairs of affiliates), or on a multi-lateral basis (taking all affiliates together).


Payments pattern

escribes the lagged collection pattern of receivables, for instance the probability that a
72-day-old account will still be unpaid when it is 73-days-old.


Prepayments

payments made in excess of scheduled mortgage principal repayments.


Weighted average coupon

The weighted average of the gross interest rate of the mortgages underlying the
pool as of the pool issue date, with the balance of each mortgage used as the weighting factor.


Zero coupon bond

Such a debt security pays an investor no interest. It is sold at a discount to its face price
and matures in one year or longer.


Zero-coupon bond

A bond in which no periodic coupon is paid over the life of the contract. Instead, both the
principal and the interest are paid at the maturity date.



Coupon / Coupons

The periodic interest payment(s) made by the issuer of a bond
(debt security). Calculated by multiplying the face value of the
security by the coupon rate.


Coupon Rate

The rate of interest paid on a debt security. Generally stated on an
annual basis, even if the payments are made at some other
interval.


Zero-coupon Bond

A security that makes no interest payments; it is sold at a discount
at issue and then repaid at face value at maturity


Coupon

Detachable certificate attached to a bond that shows the amount of
interest payable at regular intervals, usually semi-annually.Originally
coupons were actually attached to the bonds and had to be cut off or “clipped”
to redeem them and receive the interest payment.


Coupon dates

The dates when the coupons are paid. Typically a bond pays
coupons annually or semi-annually.


Coupon rate

The nominal interest rate that the issuer promises to pay the
buyer of a bond.


Zero curve, zero-coupon yield curve

A yield curve for zero-coupon bonds;
zero rates versus maturity dates. Since the maturity and duration (Macaulay
duration) are identical for zeros, the zero curve is a pure depiction of supply/
demand conditions for loanable funds across a continuum of durations and
maturities. Also known as spot curve or spot yield curve.


Zero-coupon bond, or Zero

A bond that, instead of carrying a coupon, is sold
at a discount from its face value, pays no interest during its life, and pays the
principal only at maturity.


coupon

The interest payments paid to the bondholder.


coupon rate

Annual interest payment as a percentage of face value.


Balance of Payments

The difference between the demand for and supply of a country's currency on the foreign exchange market.


Balance of Payments Accounts

A statement of a country's transactions with other countries.


Coupon

The annual interest payment associated with a bond.


Coupon Bond

Any bond with a coupon. Contrast with discount bond.


Zero-Coupon Bond

See discount bond.


Progress Payments

Periodic payments to a supplier, contractor or subcontractor for work satisfactorily performed to date.


Bearer bond

Bonds that are not registered on the books of the issuer. Such bonds are held in physical form by
the owner, who receives interest payments by physically detaching coupons from the bond certificate and
delivering them to the paying agent.


Duration

The expected life of a fixed-income security considering its coupon
yield, interest payments, maturity, and call features. As market interest rates
rise, the duration of a financial instrument decreases. See Macaulay duration.


Issue date

The date a security is first offered for sale. That date usually
determines when interest payments, known as coupons, are made.


Macaulay duration

A widely used measure of price sensitivity to yield
changes developed by Frederick Macaulay in 1938. It is measured in years and
is a weighted average-time-to-maturity of an instrument. The Macaulay
duration of an income stream, such as a coupon bond, measures how long, on
average, the owner waits before receiving a payment. It is the weighted
average of the times payments are made, with the weights at time T equal to
the present value of the money received at time T.



 

 

 

 

 

 

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