Bunny Bond

(redirected from Multiplier Bonds)

Bunny Bond

A bond with a provision that bondholders may, at their discretion, reinvest coupon payments in other bonds with the same interest rate and maturity. This protects bondholders from the risk that interest rates will fall by the time coupon payments are made, resulting in lower returns. It is also called a multiplier bond or a guaranteed coupon reinvestment bond. See also: Reinvestment risk, PIK.
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Answer--A "bunny bond" or multiplier bond is a bond in which investors reinvest the income into bonds with the same terms and conditions as on the original bond (thus, the term "bunny" bond because they multiply like bunnies).