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Range bonds

Range bonds Definition

Bonds that stop paying an investor when the bond's reference rate is higher or lower than a predetermined range on an established index. The bonds pay an above-market coupon rate as long as the reference rate falls within the range. For example, if LIBOR is the index, a range bond might pay LIBOR plus 75 basis points for each day LIBOR is between 3.5 and 5 percent. When LIBOR is less than 3.5 percent or more than 5 percent, the bond accrues no interest. A range bond is a type of structured note.

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