Zero coupon bonds

What is a zero coupon bond?

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

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. 

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

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

More terms

Holding Period Return

The amount of money generated by an asset during the time that it was held by an investor..
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Time-Weighted Rate of Return (TWRR)

A return calculated over the time period invested, that excludes extraneous elements, such as deposits to and withdrawals from the investment accounted.
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Coupon

Also called a dividend, this is the fixed annual interest paid to gilt holders. It’s usually paid in two equal, semi-annual instalments and expressed as a percentage of the nominal value of the gilt.
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United States Dollar (USD)

The famous greenback our friends in the US use as currency.
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Investment Trust

A company that pools money together from multiple investors and then invests it.
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Yield curve

A graphical representation of interest rates over time
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Hedge Fund

Investment funds that are often associated with riskier and shorter-term trading strategies.
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Packaged Retail and Insurance-based Investment Product (PRIIP)

An investment where, regardless of its legal form, the amount repayable to the retail investor is subject to fluctuations.
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Collective investment scheme

Learn what's a collective investment scheme
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