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This week's Helpful Hint is:
"What is a long coupon?"
A long coupon occurs when a bond is issued between two coupon payment dates and the issuer decides to skip the first coupon payment. Then, they provide a prorated amount for the next coupon payment. This means that the first payment is typically larger than the other payments. However, this shouldn't impact the total value of the bond because it is a prorated amount.
Example:
Date of Issue: August 5, 2023
Coupon Frequency: Semiannual
Coupon Payment Dates: Jan 1 & July 1
Instead of the first payment being shorter (August 5 - Jan 1 or 5 months), the first payment will be a prorated amount from August 5 to July 1 (11 months) and then future payments become normalized on the typical semiannual schedule.
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If you have questions, or want more information, you can EMAIL US.
Last week's Helpful Hint was:
"Did you know we archive our weekly newsletters?"
You can read last week's eNewsletter by clicking HERE.
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