Z

A bond that is sold at a discount and that does not pay coupon interest on a continuous basis, but delivers a return when payment of final principal plus all accumulated compounded interest is paid at maturity.

While Treasuries are not generally issued as zero-coupon bonds, the remaining coupon interest payments can be stripped from the principal to make up multiple zero-coupon bonds. These bonds can then be trade as independent, negotiable zero-coupon securities.

Although accumulated interest is not paid until maturity, the interest is taxable yearly.