High coupon bond definition Coupon Rate

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All else held equal, bonds with higher coupon rates are more desirable for investors than those with lower coupon rates. A coupon rate is the yield paid by a fixed-income security; a fixed-income security's coupon rate is simply just the annual coupon payments paid by the issuer relative to the bond's face or par value.

In other words, the bond trading at a premium will offer higher income payments than the bond trading at a discount, which makes up for the difference in price.

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Such bonds make only one payment: Market interest rates change over time, and as they move higher or lower than a bond's coupon rate, the value of the bond increases or decreases, respectively. The origin of the term "coupon" is that bonds were historically issued in the form of bearer certificates.

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