An index bond is a special bond for which the value is determined by the current index rate, such as the Lehman ten-year bond index. An index bond does not have a maturity date. If the index rate plummets, the value of the index bond also decreases. If the index rate rises, the value of the index bond increases.
(An index rate is the standard that lenders use to determine the amount of interest a borrower will pay on a variable rate loan).
(An index rate is the standard that lenders use to determine the amount of interest a borrower will pay on a variable rate loan).