A bond that pays large coupons over its life. This bond typically sells at par, while the holder receives a high coupon payment. As a result, the holder’s return on the bond will consist mainly of interest income. Interest income is taxed at a much higher rate than capital income. As such, an investor’s after-tax yield is less from holding high rate bonds than from holding low rate bonds.
This bond is also known as a high-rate bond.
