Flat Bond

Bond payments come on a set schedule, usually semi-annually. However, the interest on those bonds is theoretically accruing at a constant rate. Think of it like a cab ride. The meter is running the whole time, the amount you owe going up by the minute and the mile. But you don’t have to pay until you get to the destination (it’s not like you have to keep throwing cash at the driver to keep them going).

A flat bond is one that is sold without the accrued interest. The alternative would be to take the accrued interest into account, factoring it into the price so the seller gets credit for each day that’s passed since the last coupon payment. A flat bond doesn’t do that.