Firms pay a significant fraction of the total cash flow of corporate bonds in the form of coupons before the maturity date. Understanding why firms favor this bond structure has been overlooked by the literature, in part because standard models imply no cost-of-capital effect from making early payments (Modigliani and Miller, 1958). The goal of this paper is to study, empirically and theoretically, the advantages of issuing coupon-paying bonds. Our empirical analysis uncovers a pecuniary benefit of paying coupons arising from a demand for liquidity by investors, and studies how this coupon premium is affected by secondary bond market structure. We also develop a New Monetarist model of direct and indirect bond liquidity that can rationalize our empirical findings.