A callable bond in which the coupon is significantly above current market interest rates. In other words, the bond is selling above the initial call price, i.e., at a premium. Cushion bonds respond slowly to changes in interest rates: they lose less of their value as rates move up and gain less in value as rates move down. The bond has the features of a high-coupon yield and a market price below a comparable noncallable bond (thanks to its embedded call option).

These features make cushion bonds suitable for conservative investors seeking high income rather than capital accumulation.