Commodity Interest-Indexed Bond

Derivatives
Treasury Bond Futures Option
January 1, 2023
Derivatives
TLO
January 1, 2023

An interest-indexed bond in which the coupon rate is linked to the price of a certain commodity such as oil, gas, gold, etc. This bond is usually issued by the producer of the commodity to hedge against unfavorable changes in the price of its commodity over a specified period of time. The interest payment is only indexed. At times, the principal might also be indexed, but this practice is not a market norm.

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