Bunny Bond

AAA

DEFINITION of 'Bunny Bond'

A type of bond that offers investors the option to reinvest coupon payments into additional bonds with the same coupon and maturity.

Also known as "multiplier bond" or "guaranteed coupon reinvestment bond."

INVESTOPEDIA EXPLAINS 'Bunny Bond'

Bunny bonds are an effective way to protect against reinvestment risk, which arises from the possibility that interest rates will drop in the future. With a normal bond, investors are exposed to the risk of having to reinvest their coupons at a lower interest rate. If an investor chooses to reinvest all cash coupons back into the bond he is currently holding, it behaves similarly to a zero-coupon bond, as the investor receives no cash flow until maturity.

RELATED TERMS
  1. Indenture

    A legal and binding contract between a bond issuer and the bondholders. ...
  2. Bowie Bond

    An asset-backed security;which uses the current and future revenue ...
  3. Coupon

    The interest rate stated on a bond when it's issued. The coupon ...
  4. Coupon Bond

    A debt obligation with coupons attached that represent semiannual ...
  5. Debenture

    A type of debt instrument that is not secured by physical assets ...
  6. Maturity

    The period of time for which a financial instrument remains outstanding. ...
Related Articles
  1. Options & Futures

    Are Structured Retail Products Too Good To Be True?

    Spot a rotten investment before you get seduced by its sweet promise of profit.
  2. Investing

    What is the difference between a zero-coupon bond and a regular bond?

    The difference between a zero-coupon bond and a regular bond is that a zero-coupon bond does not pay coupons, or interest payments, to the bondholder while a typical bond does make these interest ...
  3. Bonds & Fixed Income

    Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
  4. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  5. Options & Futures

    Writing Covered Calls On ETFs

    The strategy of writing covered calls on ETFs can limit your losses and hedge risk, but they cap your upside potential.
  6. Bonds & Fixed Income

    What determines the price of a bond in the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market, and why bond prices and yields move in opposite directions.
  7. Taxes

    Why should I keep records on my tax-exempt bond transactions?

    Keep your purchase records on all investments, including tax-exempt bonds. Though the interest is tax-free, you may owe taxes if you sell your bond for a gain.
  8. Bonds & Fixed Income

    What causes a bond's price to rise?

    Learn about factors that influence the price of a bond, such as interest rate changes, credit rating, yield and overall market sentiments.
  9. Mutual Funds & ETFs

    How can I find good investments among lower rated bonds?

    Invest in high-yield bonds through mutual funds, exchange-traded funds or closed-end funds, leaving the job of finding a good deal to an expert.
  10. Blackrock has lowered its fees to snag money leaving Pimco's bond funds. But by how much and who's following suit? Read on.
    Investing Basics

    Thank You, Pimco: BlackRock Drops Bond-Fund Fees

    Blackrock has lowered its fees to snag money leaving Pimco's bond funds. But by how much and who's following suit? Read on.

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center