The coupon rate on a bond is also known as the nominal yield. The interest payments investors get from their bond investments come from the this yield. This bond interest yield is the rate the issuer pays to par value (amount of bonds owned). It is fixed and never changes during the life of the investment.
The nominal yield is not always your overall rate of return on a security - it usually is not. When someone buys a bond at a premium, their total rate of return will be lower than the coupon rate. Since the interest is only paid to par, the premium (amount above par) is lost over the life of the security. This will give the investor a lower yield to maturity.
Bonds bought at a discount will have a higher YTM, compared to it's nominal.
Call - Callable
Bonds with higher coupon rates also get called first, since their interest rate is higher than the market. When issuers examine their fixed income debt securities, the true interest cost to them regardless of price is the coupon rate. That is why the higher nominal yield issues will see a call first.
The yield to call is also usually lower with higher coupon issues since those are normally bought at a premium and many bonds are called at par or slightly over par. If the call price (the price it costs the issuer to redeem) is lower than the price paid by the investor, the yield to call is lower. If a nominal yield is low, the YTC may not be lower but lower coupon securities are not called as often so the higher yield to call is many times at best hypothetical given the lower interest rate.
Higher bond coupon rates will provide more current income to the investor, so as far as income - higher is better. As far as yield, it is not always better to chase the highest nominal coupon.
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