Fixed Income · Core
Coupon
A coupon is the contractual interest payment on a bond — usually a fixed percent of par, sometimes floating, sometimes zero.
Definition
The issuer pays the coupon on a schedule (semi-annual in US Treasuries, annual in many EU bonds). The coupon rate is not the yield. A 2% coupon bond can yield 5% if it trades at a discount. Zero-coupon bonds pay nothing until maturity.
Why it matters
Cash-flow matching and tax (OID) care about coupons. Price is the discounted remainder; coupon is only the contractual drip.
Case
A 30-year 2% coupon bought at par in 2020 marked to 60c when yields went to 5%. The coupon did not change; the discount rate did.
How to read it
Never confuse coupon with YTM. For floaters, the coupon is an index plus a quoted margin — the risk is the margin, not the index print.
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