Cushion Bond
2020-08-10 15:53
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A type of callable bond that sells at a premium because the issued coupon payments are above market interest rates.
|||Mostly chosen by investors interested in generating high income conservatively. As interest rates rise, the cushion bond depreciates less than regular bonds, since it already pays a premium. On the other hand, as interest rates fall, the cushion bond's value appreciates less due to the risk of the company calling the bond.
