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

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.

Running yield

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

Investment Return

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

Total Return

This is the measurement of a fund’s performance in a specific period.

Compound interest

Understand what compound interest means and how it's calculated

Diversification

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

Professional Client

An investor that is able to meet several regulatory criteria.

Arithmetic Mean

The sum of a set of numbers added together and then divided by the total amount of numbers in that set.

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Zero coupon bond