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

We explain what a 'bull market' means

The amount of money generated by an asset during the time that it was held by an investor..

A place where shares of publicly listed companies are traded.

Stocks in companies that aren’t necessarily growing fast, but instead are dependable and stable.

The amount of money a company would be left with by subtracting its liabilities from the value of its assets.

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

Non-US individuals and businesses may have to file this form for the Internal Revenue Service (IRS), the US tax authority.

The concept that money you have now is more valuable than the same sum in the future.

The money you pay when investing.