What are 'zero-coupon bonds'? Definition & meaning

What is a zero coupon bond?

A zero coupon bond is a bond that does not make interest payments.

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This type of bond is issued at a discount to its maturity value and is redeemed at the maturity value, generating a return for the investor.

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UK Treasury bills are an example of a zero coupon bond.

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Zero coupon bonds can be issued by governments, municipalities, and companies.

More terms

Clean price

The quoted price of a gilt, which excludes accrued interest

Conventional gilts

Gilts where the dividends and principal repayments are fixed in nominal terms. This is as opposed to an index-linked gilt where the dividends and principal repayments are related to movements in the Retail Prices Index (RPI).

Exchange-Traded Fund (ETF)

A collection of investments, pooled into a single fund that can be bought and sold on a stock exchange.

NYSE

The world's largest stock exchange. Wall St HQ.

Fundamentals

The data or information that is likely to impact a company's stock price.

LSE

London Stock Exchange, which was founded in 1571 and now has a market cap of almost $5 trillion.

Over-The-Counter (OTC)

A security that is sold outside of an exchange.

Securities

Bonds and stocks.

Earnings per share

We look at what earnings per share mean and how to calculate it

Zero coupon bond