Coupon

The Jolly Contrarian’s Glossary The snippy guide to financial services lingo.™ Go Premium A Transylvanian bond spotted in Sighișoara yesterday Index — Click the ᐅ to expand: Glossary Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

Interest. Derives from the traditional means of paying interest on a definitive, security-printed bearer bond, wherein each interest payment was represented by a detachable perforated strip on the side of the bond - you know, like coupons in the newspaper - which the bondholder would tear off and present to the paying agent in return for the interest payment in question.

Hence the fabled journey each year of the Belgian dentist in which he would set out in his Citroën 2CV with only his favourite pork-pie hat, a brown suit and a battered suitcase full of carefully clipped coupons, cross the border, present his coupons to the Luxembourg paying agent and promptly depart on a two-week bacchanalian bender in the Balearic before returning to his maxillofacial practice in Brussels' red-light district on the first day of September.

Of course, there aren't any security-printed bonds any more - everything is in dematerialised, book-entry form - so these days a "coupon" can refer to any interest-like payment, under loans, swaps etc, or specifically to the interest payment obligation under a bond as a discrete financial instrument from its host bond. Each coupon, once detached, is its own transferable promissory note , it can trade in the same way as the bond from which it was detached trades. This is called coupon stripping.

See also

Belgian dentist