Zero coupon bonds

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

LSE

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

The date on which a gilt is redeemed and the gilt holder receives the repayment of the nominal amount and final dividend or coupon payment.
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Total Return

This is the measurement of a fund’s performance in a specific period.
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United States Dollar (USD)

The famous greenback our friends in the US use as currency.
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Key Information Document (KID)

A document issued by an investment fund to help investors determine if it's the right fund for them.
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Professional Client

An investor that is able to meet several regulatory criteria.
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S&P 500

Find out what is the definition of the S&P 500 index.
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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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Net asset value

Mutual funds and investment trusts are priced on their net asset value (NAV).
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