Step-Up Bond

Filed Under: ,
Dictionary Says

Definition of 'Step-Up Bond'


A bond that pays an initial coupon rate for the first period, and then a higher coupon rate for the following periods. A step-up bond is one in which subsequent future coupon payments are received at a higher, predetermined amount than previous or current periods. These bonds are often purchased by individuals or portfolio managers who wish to hold fixed income securities with similar features to TIPS, but with a higher coupon.



Investopedia Says

Investopedia explains 'Step-Up Bond'


These bonds are known as step-ups because quite literally the coupon "steps up" from one period to another. For example, a five-year bond may pay a 4% coupon for the first two years of its life and a 6% coupon for the final three years. Such a bond would most likely offer a coupon below current rates at the time of inception, compensating the seller for offering higher coupons in coming periods.



comments powered by Disqus
Hot Definitions
  1. Closed-End Fund

    A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange.
  2. Payday Loan

    A type of short-term borrowing where an individual borrows a small amount at a very high rate of interest. The borrower typically writes a post-dated personal check in the amount they wish to borrow plus a fee in exchange for cash.
  3. Securitization

    The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors.
  4. Economic Forecasting

    The process of attempting to predict the future condition of the economy. This involves the use of statistical models utilizing variables sometimes called indicators.
  5. Chicago Mercantile Exchange - CME

    The world's second-largest exchange for futures and options on futures and the largest in the U.S. Trading involves mostly futures on interest rates, currency, equities, stock indices and agricultural products.
  6. Private Equity

    Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.
Trading Center