Step-Up Bond

A step-up bond is a type of bond with increasing yields. While conventional bonds pay out an annual yield that is fixed across the bond term, the yields paid out by step-up bonds increase at intervals throughout the bond term. Typically, yields increase every year.

The disadvantage of step-up bonds is that issuers reserve the right to require investors to redeem these bonds at the end of each interval after settling payment of yields.

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