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

Wall Street

A street in New York that became a figure of speech for the financial markets of the US.

Oligopoly

A situation in which a market or industry is controlled by a small group of companies.

United States Dollar (USD)

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

Bond

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Bed & ISA

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Diversification

An investment strategy in which money is put into a variety assets.

Stock Market

A place where shares of publicly listed companies are traded.

Zero-Sum Game

A situation in which one person's gain is another's loss.

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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Zero coupon bond