Definition
The fixed interest payment a bond makes, usually stated as a yearly percentage of its face value.
The story
A $1,000 bond with a 4% coupon pays $40 a year, often in two $20 payments. The coupon never changes; what changes is the bond's price, and with it the yield a new buyer gets. The name comes from paper bonds that had coupons you clipped and turned in to collect each payment.
Why markets watch it
Treasury auctions set the coupon on new notes and bonds, so the level of rates gets locked in for years.
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