Bond Coupon

What is a "Coupon"

"Coupon" payments are nothing more than interest payments that the bond holder receives for purchasing a bond. Let's take a look back through history to understand how that term was derived.

Prior to 1980, a bond holder would receive a document from the bond issuer that would serve as proof of ownership. This document, known as the "bond certificate", would have coupons attached to it which would enable the bearer of the bond to receive the interest payments due to them, hence the introduction of the term "bearer bonds". The bond holder would send the coupon in to the trustee for the bond issuer, and then receive their interest payment.

Then in the mid 1980's, bonds started to be issued with the owners' name on them. These bonds became known as "registered bonds". Registered bonds sent coupon payments, or interest payments, to the bond holder of record automatically.

Finally, the most common form of bond issuance, which we currently use, began with the age of technology. Most bonds are now issued through a system known as Book-Entry. Bond purchases are now followed with a statement from your financial institution with the details of your purchase and coupon payments are automatically sent to the financial institution that you choose.