QUICK DEFINITION
Zero-Coupon Bond is a bond that makes no periodic coupon payments and is typically issued or traded below its face value.
WHY IT MATTERS
Why Zero-Coupon Bond matters in bond markets
Its entire return comes from the difference between purchase price and redemption value, creating relatively high duration for its maturity.
MARKET CONTEXT
How to think about it
Bond investors use zero-coupon bond as part of a wider framework that links prices, yields, cash flows, liquidity and risk. The concept should therefore be read together with its related terms rather than as an isolated definition.
Is Zero-Coupon Bond important for fixed-income investors?
← Back to the Bond Market Glossary Yes. Its entire return comes from the difference between purchase price and redemption value, creating relatively high duration for its maturity.