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."
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BREAKING DOWN '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 zerocoupon bond, as the investor receives no cash flow until maturity.
RELATED TERMS

Reinvestment Rate
The amount of interest that can be earned when money is taken ... 
Reinvestment Risk
The risk that future coupons from a bond will not be reinvested ... 
Coupon Rate
The yield paid by a fixed income security. A fixed income security's ... 
Coupon Bond
A debt obligation with coupons attached that represent semiannual ... 
Current Coupon Bond
A bond with a coupon rate that is within 0.5\% of the current ... 
ZeroCoupon Bond
A debt security that doesn't pay interest (a coupon) but is traded ...
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