- Cushion Bond
- 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.
Investment dictionary. Academic. 2012.
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