What does the coupon payment refer to in bond agreements?

In bond agreements, the coupon payment refers to the periodic interest payment made to the bondholders. This payment is typically a fixed percentage of the bond's face value, which is the principal amount that the bond issuer promises to repay at maturity. The coupon payment serves as compensation to bondholders for lending their money to the issuer and is usually paid semi-annually, annually, or at some other specified intervals over the life of the bond.

Understanding this concept is crucial because it directly impacts the bond's yield—the lower the price of a bond, the higher the yield, assuming the coupon payment remains constant. Therefore, recognizing that coupon payments are a fundamental characteristic of bonds helps investors evaluate the return they can expect from their investment.