CouponRate and step-up bonds

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Imported from previous forum

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[ original email was from John Hardman - yiq12@dial.pipex.com ]
The Field Definitions section of the FIX 4.2 protocol says that the CouponRate field (tag 223) "Will be zero for step-up bonds". Is there something else in each message containing CouponRate that identifies the message as being a step-up bond or is it that zero value that makes it a step-up bond ?

Also, I have looked in various financial dictionaries and cannot find any reference to a "step-up" bond. Can anyone tell me what a step-up bond is please.

Thanks,

John Hardman.

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Step-up’s are just a way of saying the coupon rate changes upwards at a specified future date(s) or when a certain event occurs.

Best just to think of them as a special case of floating rate securities.

> The Field Definitions section of the FIX 4.2 protocol says that the CouponRate field (tag 223) "Will be zero for step-up bonds". Is there something else in each message containing CouponRate that identifies the message as being a step-up bond or is it that zero value that makes it a step-up bond ?
>
> Also, I have looked in various financial dictionaries and cannot find any reference to a "step-up" bond. Can anyone tell me what a step-up bond is please.
>
> Thanks,
>
> John Hardman.
>
>

4

A step up bond is often used by lower credits and start ups that want to delay cash flow obligations on bond debt. Initial coupons may be zero and rise on every coupon date. There may be typically 3 or 4 rises. Note that there are bonds that are zero coupon and remain this way all their lives. They just trade at a deep discount

> Step-up’s are just a way of saying the coupon rate changes upwards at a specified future date(s) or when a certain event occurs.
>
> Best just to think of them as a special case of floating rate securities.
>
>
> > The Field Definitions section of the FIX 4.2 protocol says that the CouponRate field (tag 223) “Will be zero for step-up bonds”. Is there something else in each message containing CouponRate that identifies the message as being a step-up bond or is it that zero value that makes it a step-up bond ?
> >
> > Also, I have looked in various financial dictionaries and cannot find any reference to a “step-up” bond. Can anyone tell me what a step-up bond is please.
> >
> > Thanks,
> >
> > John Hardman.
> >
> >
>