Cushion Bond
A type of callable bond that sells at a premium because the issued coupon payments are above market interest rates. Investopedia Says:
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. Related Terms:
Callable Bond
Forced Conversion
Premium |