Coupon rate

Bonds pay income that can be fixed or floating, and the payments may be made periodically or at maturity. Most debt securities carry a coupon rate that stays fixed until maturity, and is a percentage of the principal amount. Typically, investors receive income payments quarterly, semi-annually or annually.

Credit quality

Credit quality refers to the ability of the bond issuer to repay its debts. Credit assessment is usually conducted by credit rating agencies like Standard & Poor’s and Fitch Ratings. Bonds of better quality with credit ratings ranging from AAA to BBB are commonly referred to as investment-grade bonds. Investment-grade bonds may offer lower coupon rates because the risk of default by issuers is lower. Hence, investors are willing to accept lower coupon rates. Conversely, bonds that are of poorer credit quality usually offer higher coupon rates.

Maturity

Bond maturity refers to the specific future date on which the investor’s principal will be repaid. The longer the time to maturity, the higher the coupon rate you can expect to receive.

Price

Besides the coupon rate, maturity and credit quality, bond prices are also influenced by interest rate movements. When interest rates are low, bond prices tend to rise, and vice versa. When the market price of bonds rises above the face value, they are selling at a premium. If the bond prices are traded below the face value, they are selling at a discount.