Bond structure that repays principal in one lump sum at maturity while paying coupon interest during the life of the issue.
A bullet bond is a bond that repays principal in one lump sum at maturity rather than paying principal down over time. Coupon interest is usually paid periodically during the life of the bond, but the face value stays outstanding until the maturity date.
Bullet bonds matter because their cash-flow structure is the baseline for much of fixed-income analysis. Many bond concepts, including Yield to Maturity, Duration, and Convexity, are easiest to understand first on plain bullet structures before embedded options or amortization complicate the picture.
For a standard coupon bond, price reflects the present value of coupon payments plus the single principal payment at maturity:
Where:
P is the bond priceC is each coupon paymentF is face value repaid at maturityy is yield per period| Structure | Principal pattern | Where it is common |
|---|---|---|
| Bullet bond | Full face value due at maturity | Government bonds, corporate bonds, many benchmark issues |
| Amortizing bond | Principal repaid in stages | Asset-backed and project-style structures |
| Callable bond | Principal may return early if called | Issuer can alter the effective life of the bond |
A \$1,000 five-year bond pays a 5% annual coupon. Each year the investor receives \$50 in coupon income. At the end of year five, the investor also receives the \$1,000 principal back.
That single final principal payment is what makes the bond a bullet structure.
A bullet bond can pay regular coupons. The defining feature is the timing of principal repayment, not the absence of coupons.
A bond can be bullet and still be callable. Bullet refers to how principal is scheduled if the bond runs to maturity; callability refers to whether the issuer can retire it early.