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

Stock Market

A place where shares of publicly listed companies are traded.

Running yield

The annual interest payment (dividend) divided by the current market price of a bond.

Forward pricing

Mutual funds are traded on a forward pricing basis, meaning the price you see will be different to the price you may trade at.

S&P 500

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

Fundamentals

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

Withholding Tax

A tax deduction made at the source of the payment.

Professional Client

An investor that is able to meet several regulatory criteria.

Costs and Charges

The money you pay when investing.

Real Estate Investment Trust (REIT)

An investment trust specialised in investing in commercial property such as parking garages or GP offices.

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Zero coupon bond