Full Coupon Bond: Understanding Its Characteristics and Market Behaviour

February 06, 2025 08:00 AM PST | By Team Kalkine Media

Google News:

Full Coupon Bond: Understanding Its Characteristics and Market Behaviour — Image source: shutterstock

Recent News

Wolfspeed Surges Sharply Amid Heavy Trading Volume Earnings per share

Bristow Group (NYSE:VTOL) Gains Amid Strength Joins Russell 1000

The Open Platform is first unicorn in Web3 ecosystem in Telegram at $1...

CFRA increases S&P 500 target after index hit all time high

Highlights

A full coupon bond carries a coupon rate matching the prevailing market interest rate.

These bonds trade at par value, meaning their market price equals their face value.

Investors receive periodic interest payments while the principal is repaid at maturity.

A full coupon bond is a type of fixed-income security where the coupon rate—the interest paid to bondholders—aligns with the current market interest rate. This feature ensures that the bond is priced at par, meaning its market value is equal to its face value. Investors purchasing such bonds expect a return that mirrors the broader interest rate environment.

Coupon Rate and Market Parity

The primary characteristic of a full coupon bond is its coupon rate, which is neither higher nor lower than the market rate. As a result, investors neither pay a premium nor receive a discount when buying the bond. The bond’s price remains stable unless interest rates fluctuate, influencing future bond prices.

Interest Payments and Maturity

Bondholders of a full coupon bond receive regular interest payments, typically semi-annually or annually. These payments continue until the bond reaches its maturity date, at which point the principal amount is fully repaid to the investor. Because the bond is issued at par, the return on investment consists entirely of these interest payments rather than capital gains.

Stability and Investment Appeal

A full coupon bond appeals to investors seeking predictable income with minimal price volatility. Since it aligns with market rates, it avoids the price fluctuations seen in discount or premium bonds. This makes it a preferred choice for conservative investors looking for stability in their fixed-income portfolios.

Conclusion

Full coupon bonds offer a straightforward investment option for those who seek fixed returns with minimal price risk. By maintaining a coupon rate that matches market interest rates, they provide a stable and predictable income stream. Their ability to trade at par makes them an attractive choice for investors looking for balance and reliability in their bond investments.

Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media LLC (Kalkine Media, we or us) and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures/music displayed/used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it, as necessary.