A bond with a high coupon rate will trade at a higher price and with less volatility than will a similar bond with a low coupon rate. The greater the portion of the yield that the investor receives through coupon payments (cash income) rather than through the value of the bond at maturity (capital gain), the smaller the risk and therefore, the higher and more stable, a bond's price. In other words, cash flow has value. Cash flow cushions the variability in price movement of the bond. Therefore, high coupon bonds are sometimes known as cushion bonds.

Features of a debt issue include convertibility, call provisions, sinking funds, and purchase funds, any and all of which can affect the market price of the bond. The higher the credit rating of the issuer, the higher the price of the bond, everything else equal. The closer a bond is to the maturity date, the smaller will be the variation from the par value of the bond.

During periods of rising interest rates, the prices of longer-term bonds usually decline more than the prices of shorter term bonds. When interest rates fall, however, prices of longer term bonds tend to rise the most. Longer term bonds are, therefore, more volatile than short term bonds. Lower coupon bonds are more volatile than high coupon bonds. Bond prices, in general, are more volatile when market interest rates are low.

The market price of a fixed income bond depends on its coupon, maturity date and the prevailing market interest rate. Prices decline when interest rates rise and bond prices rise when interest rates decline in order to adjust the price and to reflect a competitive yield. A change in the issuer's credit rating can also cause a fluctuation in price, as higher risk is reflected in the price/yield relationship. Even without a formal rating change, reduced demand can cause lower bond prices and higher yields. For example, this is rapidly reflected in the price of junk bonds when market participants fear that a recession will lead to an increase in defaults. Poor business conditions over a prolonged period can cause financial weakness and jeopardize the firm's ability to pay interest.