These bonds have extendible maturity dates or coupon payments that can be stepped up.
Structured bonds have maturity dates that can be extendible or coupon payments that can be stepped up. Extendible bonds offer predetermined interest payments like other bonds. If the bonds aren't called, the investor is paid a stepped-up coupon according to the rate schedule. This stepped-up rate is the compensation for the risk of extending towards final maturity.
Structured bonds offer the following features:
- Income – Interest is paid on a monthly, semi-annual or annual basis.
- Liquidity – You can sell a Structured Bond at its market value on any business day.
- Price changes - While the amount of your interest will almost always remain the same, the value of your bond will change daily.
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Before investing in bonds, you should understand the risks involved, including credit risk and market risk. Bond investments are also subject to interest rate risk such that when interest rates rise, the prices of bonds can decrease, and the investor can lose principal value if the investment is sold prior to maturity.