Baby Bond
Quick Definition
A bond issued with a face value below the standard $1,000 par, typically $25 or $50, making fixed income investing accessible to smaller investors.
What Is Baby Bond?
A baby bond is a fixed-income security issued with a face value significantly lower than the standard $1,000 par value of most bonds, typically at $25, $50, or $100 denominations. These smaller-denomination bonds trade on stock exchanges like NYSE or NASDAQ rather than the over-the-counter bond market, making them easily accessible through standard brokerage accounts. Baby bonds are commonly issued by utilities, telecoms, and financial companies seeking to tap retail investor demand. They function identically to regular bonds — paying fixed or floating interest and returning par value at maturity — but their lower price point allows individual investors to build diversified fixed-income portfolios with less capital. Many baby bonds are perpetual or have very long maturities (25-30 years) and may include call provisions.
Baby Bond Example
- 1AT&T issued baby bonds at $25 par value with a 4.75% coupon, allowing retail investors to buy fixed income for just $25 per bond
- 2A $25 baby bond paying $1.50 annual coupon yields 6%, trading on the NYSE like a stock
Related Terms
Par Value
The face value of a bond, typically $1,000, representing the amount repaid to the bondholder at maturity.
Corporate Bond
A debt security issued by a corporation to raise capital, paying periodic interest and returning principal at maturity.
Coupon Rate
The annual interest rate stated on a bond, expressed as a percentage of face value, that determines the periodic coupon payments.
Callable Bond
A bond that gives the issuer the right to redeem it before maturity at a specified price, typically when interest rates fall.
Bond
A fixed-income debt security where investors loan money to an issuer in exchange for regular interest payments and return of principal at maturity.
Treasury Bond (T-Bond)
A long-term U.S. government debt security with a maturity of 20 or 30 years, paying semiannual coupon interest.
Expand Your Financial Vocabulary
Explore 130+ financial terms with definitions, examples, and formulas
Browse Bonds & Fixed Income Terms