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

Yield

Income from an investment as a percentage of its current price.

DMO

The United Kingdom Debt Management Office. It’s an executive agency responsible for managing the government’s debt and cash needs, primarily through issuing gilts and Treasury bills.

Spot Rate

The currency exchange rate a bank quotes, valid with immediate effect.

Unit Trusts

A collective investment scheme the investors pay money into in exchange for units. The money is invested in a diversified portfolio of assets.

Net Income (NI)

The money a firm is left with from sales after subtracting taxes and different business costs.

SPAC

Find our what a SPAc or special purpose acquisition company is.

Dividends

Find out what dividends are and how they can contribute to the growth of your investment portfolio.

After-hours trading

Trading outside of a stock exchange's opening hours.

UK Treasury bill

A debt instrument issued by the UK government with a maturity of less than one year.

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Zero coupon bond