Coupon Payment
Quick Definition
The periodic interest payment made to bondholders, typically paid semiannually based on the bond's stated coupon rate and face value.
What Is Coupon Payment?
A coupon payment is the periodic interest payment a bond issuer makes to bondholders, representing the cost of borrowing. The term "coupon" dates back to when physical bonds had detachable coupons that holders would clip and present for payment. Most U.S. bonds pay coupons semiannually (every six months), though some pay annually, quarterly, or monthly. The coupon amount is calculated as the coupon rate multiplied by the face value, divided by the payment frequency. For example, a $1,000 bond with a 6% annual coupon rate pays $30 every six months ($1,000 × 6% ÷ 2). Coupon payments are fixed for the life of the bond (for fixed-rate bonds), providing predictable income regardless of market conditions. This is distinct from the bond's yield, which changes as the market price fluctuates. Floating-rate bonds have coupon payments that adjust periodically based on a reference rate like SOFR plus a spread.
Coupon Payment Example
- 1A $10,000 Treasury note with 4% coupon pays $200 every six months — $400 annually in total interest income
- 2A floating-rate corporate bond pays SOFR + 2% — if SOFR is 4.5%, the current coupon is 6.5% ($65 per $1,000 semiannually)
Related Terms
Coupon Rate
The annual interest rate stated on a bond, expressed as a percentage of face value, that determines the periodic coupon payments.
Par Value
The face value of a bond, typically $1,000, representing the amount repaid to the bondholder at maturity.
Bond Yield
The return an investor earns from a bond, expressed as an annual percentage, which can be measured in several ways including current yield and yield-to-maturity.
Accrued Interest
Interest that has accumulated on a bond since the last coupon payment date but has not yet been paid to the bondholder.
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.
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