Short coupon - Financial definition
Concise definition of the term short coupon
Term designing a coupon period for a bond which is shorter than the other, regular coupon periods. If a bond has a short coupon, it is usually either the first or the last coupon of the bond.
Comprehensive definition of the term short coupon
An issuer can decide to issue a bond with a short coupon if he wishes - or is required - to make coupon payments on certain dates, but proceed with the issue - or with the redemption - on a date which is not an anniversary date of these.
Example
A company requires external capital in order to finance its growth and decides to issue a 5-year bond in 2017. For financial planning reasons, it wishes to make coupon payments on June 30th of each year. In February of 2017 however, the company encounters excellent market conditions for its bond issue. So, instead of waiting until June, and risking less favorable market conditions then, the company decides to proceed with the issue right away. The bond is issued value March 20th>/sup>, with a short first coupon period from March 20th, 2017 to June 30th>/sup>, 2017. The other coupons will all run regularly from June 30th to June 30th of the following year.