What is a coupon?
A coupon is the regular interest payment a bond issuer makes to the bondholder, set as a rate on the bond's face value.
The bond coupon rate is that annual rate. The coupon payment is the cash paid on each payment date.
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Worked example (hypothetical)
Take a hypothetical bond with face value F and coupon rate C, paying coupons n times a year.
| Item | Formula |
|---|---|
| Annual coupon | F × C |
| Each coupon payment | (F × C) ÷ n |
| Current yield | Annual coupon ÷ market price |
Suppose the bond's market price falls below F. The coupon payment stays the same, because it is based on face value. The current yield rises, because the same cash is now divided by a lower price. If the price rises above F, the current yield falls below C.
To run the numbers on future cash flows, see future and present value and the calculators page.
Formal definition and edge cases
Formally, a coupon is a contractual periodic payment of interest on a debt security. The prospectus defines its amount, frequency, payment dates and day-count method. Cases experienced readers should know:
- Fixed coupon: the rate is set at issue for the whole life of the bond.
- Floating coupon: a reference rate plus a fixed margin. The margin is usually quoted in basis points. The coupon resets on each reset date.
- Zero-coupon bond: there are no periodic payments. The bond is sold below face value and repaid at face value at maturity.
- Step-up coupon: the rate changes on dates set in advance.
- Accrued interest: a buyer between coupon dates pays the seller the coupon earned so far. This is the gap between the clean price and the dirty price. See accrued interest.
- Ex-coupon: after the record date, a buyer does not receive the next coupon.
- Missed coupon: failing to pay a coupon on time is usually a default.
- Coupon vs yield: the coupon rate is fixed by contract. Yield depends on the price paid.
- Sukuk: payments are structured as profit or rent, not interest. See Islamic finance.
Where you see the term
- Government debt auctions. Results show the coupon and the cut-off yield. See bond auction.
- Central bank news. Policy rate moves change the coupons on newly issued floating-rate and fixed bonds. A recent example: SBP policy rate raised by 50 bps to 12% with effect from 27.10.2026 (MPC).
- Bond quotes and reports. A bond's name often includes its coupon and maturity, for example in Bund or Eurobond listings.
- Trading platforms. CFDs and futures on bonds track price only. A CFD holder does not receive coupons. Financing appears as swap instead.
Bond prices move against changes in interest rates, and how strongly they move depends on duration. Leveraged CFD trading on any market can lose money fast.
Related terms
- Face value (par value)
- Accrued interest
- Bond duration
- Credit spread
- Basis point
- Amortization
- Trading glossary
Frequent questions
What does coupon mean on a bond?
It is the periodic interest payment the issuer pays the holder. It is based on face value.
Is the coupon rate the same as yield?
No. The coupon rate is fixed in the bond's terms. Yield depends on the price you pay, so it changes with the market.
Why is it called a coupon?
Paper bonds once had detachable coupons. Holders cut them off and presented them to collect each interest payment.
Does a zero-coupon bond pay anything?
It pays face value at maturity. The return comes from buying below face value.
Do bond CFDs pay coupons?
No. A CFD tracks the price only. Check the instrument's conditions on the provider's official site.