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

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.

After-hours trading

Trading outside of a stock exchange's opening hours.

Technical Analysis

Examining price movements of shares and other assets, and trying to predict how they will move in the future.

Costs and Charges

The money you pay when investing.

Investment Return

The amount of money made or lost from an investment. Usually expressed as a percentage.

Margin call

Learn what a margin call stands for in financial terms.

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.

Yield to maturity (YTM)

What is yield to maturity and why is it useful?

Maturity value

What's the maturity value of a bond?

Zero coupon bond