Zero-coupon bonds pay no periodic interest (no coupon payments). Instead, they're sold at a discount to face value and the investor receives the full face value at maturity. The difference is the investor's return.
For example, a zero-coupon bond with 1,000 taka face value bought at 800 taka yields a 200 taka profit at maturity.
Key features: no coupon payments, issued at a discount, lump-sum payment at maturity, and higher sensitivity to interest rate changes than regular bonds.
Zero-coupon bonds suit long-term investors who prefer a single large payout rather than regular income — for instance, saving for a specific future expense.
In Bangladesh, Treasury Bills are essentially zero-coupon bonds. Bangladesh Bank issues 91-day, 182-day, and 364-day T-bills at a discount on behalf of the government.