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What is a Current Coupon Bond?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 09 November 2016
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    Conjecture Corporation
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The current coupon bond is a type of bond that is equipped with a coupon that is roughly half a percentage point of the current market rates for that type of bond. It is possible to identify several different types of bonds that may be configured as a current coupon bond. Just about any broker dealer can find current coupon bonds that are issued as government, municipal, or corporate bonds.

There are two main facts about a current coupon bond to understand. The first consideration to keep in mind is that a current coupon bond possesses an extremely low rate of volatility. This means that the chances of the bond being called early, or some other adverse factor resulting in some sort of trouble for the bond are practically non-existent.

Second, the interest rate of these types of bonds will be competitive with other bond offerings on the market today. Since the coupon on the bond will be either a half percentage point above or below the current market rate, the chances of a decent return on the investment are very good. As a bond issue that is a good option for the beginning investor, the current coupon bond offers the advantage of being a productive way to learn how to invest in bonds wisely.

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While the amount of the return is not likely to be a spectacular one, the consistent nature of a current coupon bond is very attractive for investors. This is especially true for investors who are concerned with incrementally increasing the value of the financial portfolio. As an example of a safe investment, the current coupon bond fills all the requirements of yielding a return while avoiding a high level of risk.

Brokers are often aware of current coupon bond investments that will yield an equitable return and will work well as one component of a broader investment portfolio. For any investor who wishes to engage in the purchase of bond issues, a current coupon bond is well worth considering.

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