- accrued interest
- (1) The dollar amount of interest accrued on a municipal security, based on the stated interest rate on that security, from its date to the date of delivery to the original purchaser. This is usually paid by the original purchaser to the issuer as part of the purchase price of the security. (2) The dollar amount of unpaid interest that has accrued to a certain date, such as to a call date.
- ad valorem tax
- (Latin: to the value added) a tax based on the value (or assessed value of property).
- advance refunding
- The refunding of an outstanding issue of bonds by the issuance and delivery of a new issue of bonds prior to the date on which the outstanding issue of bonds can be redeemed or aid in accordance with its terms. Thus, for a period of time both the issue being refunded and the refunding issue are outstanding, although the trust agreement or indenture securing the issue being refunded may be defeased by the deposit of the proceeds of the new issue into an escrow fund for the issue being refunded.
- agency transaction
- A sale and purchase of bonds when the dealer places bonds with the buyer on a commission basis rather than selling bonds that he owns.
- Investment earnings representing the difference between interest paid on bonds and the interest earned on purpose and non purpose securities in which bond proceeds are invested. The Internal Revenue Code regulates the amount and conditions under which arbitrage on the investment of bond proceeds is permissible and the 1986 Tax Reform Act requires, with limited exceptions, that arbitrage from non purpose investments must be rebated to the federal government.
- arbitrage certificate
- Transcript certificate evincing compliance with the limitations on arbitrage imposed by the Internal Revenue Code and the applicable regulations.
- ascending or positive yield curve
- The interest rate structure which exists when long-term interest rates exceed short-term interest rates.
- asked price
- The price at which securities are offered by seller (other than issuers) to potential buyers.
- assessed valuation
The value of property against which and valorem tax is levied,
usually a percentage of "true or "market" value.
Return to Top
- basis point(bp)
- Shorthand reference to 1/100 of 1 percent (.01) percent).
- basis price
- The price of a security expressed in yield or percentage of return on the investment. Price differentials in municipal bond are usually expressed in multiples of 5/100 of 1 percent, or "05".
- bearer security
- A security that has no identification as to owner. It is presumed to be owned by the bearer or the person who holds it. Bearer securities are freely and easily negotiable since ownership can be quickly transferred from seller to buyer.
- blue sky memorandum
- A memorandum specifying the way a specific issue will be treated under state securities laws, frequently of all 50 states, Puerto Rico, preliminary from, which may note that certain steps need to be taken in various jurisdictions in order to qualify the issue for sale within these jurisdictions. The memorandum is then issued in supplemental form, and generally the supplemental form reports that the required actions in the various jurisdictions have been taken.
- (1) The written evidence of debt, bearing a stated rate or stated rates of interest or stating a formula for determining that rate, and maturing on a date certain, on which date and upon presentation a fixed sum of money plus interest if payable to the holder or owner. An issue is usually composed of many bonds that mature over more than just a few years. (2) For purposes of computations tied in to "per bond," a $1,000 increment of an issue (no matter what the actual denominations are).
- bond anticipation note (BAN)
- A note issued in anticipation of later issuance of bonds, usually payable from the proceeds of the sale of the bonds anticipated or of renewal notes.
- bond bank
- Agencies created by some states to buy entire issues of bonds of municipalities. The purchases are financed by the issuance of bonds by the bond bank. The purpose is to provide better market access for small, lesser known issuers.
- bond counsel
- A lawyer or law firm, with expertise in bond law, deliver an opinion, upon the closing of an issue of bonds, as to legality of issuance and other matters that may include the description of security pledge and, in the case of a tax-exempt bond, an opinion as to the tax-exempt nature of the bond.
- bond funds
- Registered investment companies who assets are invested in diversified portfolios of bonds.
- bond insurance
- Insurance as to timely payment of interest and principal of a bond issue. The cost of insurance is usually paid by the issuer in case of a new issue of bonds, and the insurance is not purchased unless the cost is more than offset by the lower interest rate that can be incurred by the use of the insurance.
- bond purchase agreement
- The agreement between the issuer of bonds and the underwriter or underwriters which have agreed to purchase the bonds setting forth the terms of the sale, the price of the bonds, including any premium or discount, the interest rate or rates which the bonds are to bear, the conditions to closing, including the contents (or a description of the contents) of the opinions to be rendered on the date of closing and of certain certificates which are to be delivered on the date of closing, any restrictions on the liability of the issuer, and, occasionally, indemnity provisions if there is not a separate indemnity letter or agreement. generally, if a matter is to be considered a prerequisite to closing, it must be stated as such in this agreement. (Also called "contract of purchase or "underwriting agreement.")
- bond year
- An element in calculating average life of an issue and in calculating net interest cost and net interest rate on an issue. A bond year is the number of 12-month intervals between the date of the bond and its maturity date, measured in $1,000 increments. For example, the "bond years" allocable to a $5,000 bond dated April 1, 1980, and maturing June 1, 1981, is 5.830 [1.166 (14 months divided by 12 months) x 5 (number of $1,000 increments in $5,000 bond)]. Usual computations include "bond years" per maturity or per an interest rate, and total "bond years" for the issue.
In the municipal securities market, "brokers" play an
important role in the
secondary market by buying from
and selling to
dealers on an agency basis.
Return to Top
- Actions taken to pay the principal amount of the maturity date, in accordance with the provisions for "call" stated in the proceedings and the bonds.
- Subject to payment of the principal amount (and accrued interest) prior to the stated maturity date, with or without payment of a call premium.
- call premium
- A dollar amount, usually stated as a percentage of the principal amount called, paid as a "penalty" or a " premium" for the exercise of a call provision.
- closing date
- The date on which a new issuance of bonds is delivered to the purchaser upon payment of the purchase price and the satisfaction of all conditions specified in the bond purchase agreement.
- The fee paid to a dealer when the dealer acts as agent in a transaction, as opposed to when the dealer acts as a principal in a transaction (see " net price").
- A written document confirming an oral transaction in municipal securities that provides pertinent information to the buyer and seller concerning the securities and the terms of the transaction.
- The part of a bearer bond that denotes the amount of interest due and on what date and where the payment is to be made. Coupons are presented to the issuer's designated paying agent or deposited in a commercial bank for collection. Coupons are generally payable semiannually. (2) Coupon is also often used to refer to the interest rate of a bond.
- This is a term usually connected with revenue bonds. The margin of safety for payment of debt service, reflecting the number of times (e.g., "120 percent coverage") by which annual revenues either on a gross or net basis exceed annual debt services.
- current yield
- This is sometimes called "stock yield." The rate of return on a bond based on the ratio of the coupon income to the purchase or market price. For example, a $1,000 par value bond with a coupon of 8 percent pays $80 in coupon income. If the bond is bought at a price of 90 ($900), the current yield is 80 divided by 900, or 8.9 percent. If the bond is bought at 110 ($1.100), the current yield is 80 divided by 1,100 or 7.3 percent.
The Committee on Uniform Security Identification Procedures,
which was established under the auspices of the American
Bankers Association to develop a uniform method of identifying
municipal, U.S. government, and corporate securities.
Return to Top
- dated date (or issue date)
- The date of a bond issue from which the bondholder is entitled to receive interest, even though the bonds may actually be delivered at some other date.
- A securities firm or department of a commercial bank that engages in the underwriting, trading and sales of municipal or (other) securities.
- debt limit
- Statutory or constitutional limit on the principal amount of debt that an issuer may incur (or that it may have outstanding at any one time).
- debt service
- Principal and interest.
- debt service requirements
- Amounts required to pay debt services, often expressed in the context of a time frame (such as "annual debt service requirements").
- debt service reserve fund
- The fund into which are paid moneys which are required by the trust agreement or indenture as a reserve against a temporary interruption in the receipt of the revenues or other amounts which are pledged for the payment of the bonds. A common deposit requirement for a "debt service reserve fund" is one year's debt service on the bonds. The "debt service reserve fund" may be initially funded out of bond proceeds, over a period of time from revenues, or by a combination of the above. Many of the old trust agreement provided for a maximum amount to be retained in the "debt service reserve fund" with no provision for adjusting that amount as the outstanding indebtedness decreases. For a number of reasons, it has recently become the practice to provide for a reduction in the balance into the "debt service reserve fund" to an amount equal to the maximum annual debt service required in any of the remaining years during which the bonds are outstanding.
- deep discount
- A discount greater than traditional market discounts of 1 percent to 3 percent.
- Failure to pay debt service when due, or failure to comply with other covenants in financing documents.
- Termination of the rights and interests of the trustee and bondholders under a trust agreement or indenture upon final payment or provision for payment of all debt service and premiums, and other costs, as specifically provided for in the trust instrument.
- The face amount or par value of a bond or note that the issuer promises to pay on the maturity date. Most municipal bonds are issued in a minimum denomination of $5,000, although a few older issues are available in $1,000 denominations. Notes are generally available in a $25,000 minimum denomination.
- (1) Amount (stated in dollars or a percent) by which the selling or purchase price of a security is less than its face amount. (2) Amount by which the amount bid for an issue is less that the aggregate principal amount of that issue.
- dollar bond
- A bond that is quoted and traded in dollar prices rather than in terms of yield.
- double-barreled bond
- A bond is said to be "double-barreled" when it is secured by the pledge of two (or more) sources of payment. In some states a bond secured in the first instance by a user charge, e.g., water or sewer, may be additionally secured by ad valorem taxes.
- double exemption
Securities that are exempt from state as well as federal income
taxes are said to have "double exemption." In states
where this exemption occurs, the exemption is usually only for
bonds issued by the state or its local
governments. An exception to this rule is the bond debt of U.S.
territories such as Guam. Debt of Puerto Rico is also double
Return to Top
- exempt facilities bond
- Refers to those types of privately owned or privately used facilities which are authorized to be issued on a tax-exempt basis under the Internal Revenue Code. The Tax Reform Act of 1986 amended prior law to exclude the following types of facilities from those which can be financed of a tax-exempt basis: sports facilities; convention and trade show facilities; air and water pollution control facilities; privately owned airports, docks, wharves, and mass-commuting facilities; and most parking facilities, among other.
- extraordinary redemption
This is different from
optional redemption or
mandatory redemption in that it occurs under an unusual
circumstance such as destruction of the facility financed.
Return to Top
- face amount
- The par value (i.e., principal or maturity value) of a security appearing on the face of the instrument.
- financial advisor
- A consultant to an issuer of municipal securities who provides the issuer with advice with respect to the structure, timing, terms, or other similar matters concerning a new issue of securities.
- financial and operations principal
- A municipal securities employee who is required to meet qualifications standards established by the MSRB. The individual is the person designated to be in charge of the preparation and filing of financial reports to the SEC and other regulatory bodies.
- flow of funds
- Refers to the structure which is established in the trust instruments or bond legislation for the handling of the revenues or other funds or moneys pledged for the payment of the bonds as and when received.
- fully registered
A security that is registered as to principal
interest, payment of which is made only
to or on the order of the registered owner.
Return to Top
- general obligation bond(GO)
A bond secured by the pledge of the
issuer's full faith, credit, and,
usually, taxing power. The taxing power may be an unlimited and
valorem tax or a limited tax, usually on real estate and
personal property. Most states don't tax real estate, but leave
that power to local units of government.
Return to Top
- initial delivery
- The delivery of a new issue by the issuer to the original purchaser, upon payment of the purchase price. Also called "original delivery."
- initial offering price
- The price (based upon yield to maturity) stated as a percentage of par at which the underwriting account determines to market the issue during a set period of time, called the initial offering period. Members of the account may not offer any part of the issue at any other price during that period.
- Compensation paid or to be paid for the use of money. Interest is generally expressed as an annual percentage rate.
- inverted or negative yield curve
- The interest rate structure which exists when short-term interest rates exceed long-term interest rates (see "ascending or positive yield curve")
The public entity that issues securities and is named as
the issuer-obligor on those securities. The public entity is
the "issuer" even in those cases where the actual
source of the money to pay debt
service is to be an entity other than the issuer.
Return to Top
- joint managers
Underwriting accounts are headed by a manager.
When an account is made up of several groups of underwriting
firms that normally function as separate accounts, the larger
account is often managed by several underwriters, usually one
from each of the several groups, and these managers are
referred to as "joint managers."
Return to Top
- legal opinion
- An opinion of bond counsel concerning the validity of a securities issue with respect to statutory authority, constitutionality, procedural conformity, and usually the exemption of interest from federal income taxes.
- letter of credit(LOC)
- A security document usually issued by a bank that backstops, or enhances, the basic security behind a bond. In the case of a direct pay "LOC," the bondholder can request the bank to make payment directly rather than through the issuer.
- level debt service
- The result of a maturity schedule that has increasing principal amounts maturing each year so that the debt service in all years is essentially "level." "Level debt service" is often used with revenue bond issues (and, in a familiar area, in the traditional approach to monthly payments on home mortgages).
- limited tax bond
A bond secured by a pledge of a tax
or category of taxes limited as to rate or amount.
Return to Top
- manager (or senior manager)
- The underwriter that serves as the lead underwriter of an account. The "manager" generally negotiates the interest rate and purchase price in a negotiated transaction or serves as the generator of the consensus for the interest rate and purchase price to be bid in a competitive bidding situation. The "manager" signs the contracts on behalf of the account and generally receives either a fee or slightly larger spread for its services in this capacity (see " joint managers").
- mandatory sinking fund
- A requirement to redeem a fixed portion of term bonds, which may comprise the entire issue, in accordance with a fixed schedule. Although the principal amount of the bonds to be redeemed is fixed, the specific bonds which will be called to satisfy the requirement as to amount are selected by the trustee on a lot basis.
- A measure of the ease with which a security can be sold in the secondary market without an undue price concession.
- maturity date
- The stated date on which all or a stated portion of the principal amount of a security is due and payable.
- maturity schedule
- The schedule (by dates and amounts) of principal maturities of an issue.
- monetary default
- Failure to pay principal or interest promptly when due.
- moral obligation bond
- A type of municipal security, issued by a state agency that is not backed by the full faith and credit of a state, but state law may provide that the agency request an appropriation from the legislature to replenish the issuer's debt service reserve fund if necessary. The legislature is not required to make the appropriation.
- mortgage revenue bond
- A security issued by a state, certain agencies or authorities, or a local government to make or purchase loans (including mortgages or other owner-financing) with respect to single-family or multifamily residences.
- municipal securities principal
- A municipal securities employee under MSRB rules who has supervisory responsibility for the municipal securities operations of the firm.
- municipal securities representatives
- The broadest class of municipal securities professional who are required to pass a qualification examination under the rules of the MSRB. This group includes individuals who underwrite, trade, or sell municipal securities, do research or offer investment advice, provide financial advisory services, or communicate with investors in municipal securities.
- Municipal Securities Rulemaking Board (MSRB)
An independent, self-regulatory organization established by the
Securities Acts Amendments of 1975, which is charged with
primary rulemaking authority over
dealers, dealer banks,
brokers in municipal securities. Its 15
members are divided into three categories - securities firms
representatives, bank dealer representatives, and public
members, each category having equal representation on the
Return to Top
- negotiated underwriting
- In a negotiated underwriting the sale of bonds is by negotiation with an underwriter rather than by competitive bidding. In many states general obligation bonds must be sold at a competitive sale.
- net direct debt
- Total direct debt of a municipality less all self-supporting debt, any sinking funds, and short-term debt such astax anticipation notes and revenue anticipation notes.
- net interest costs
- The traditional method of calculating bids for new issues of municipal securities. The total dollar amount of interest over the life of the bonds is adjusted by the amount of premium or discount bid, and then reduced to an average annual rate. The other method is known as the true interest cost (see " true interest cost").
- net price
- This is the price paid to a dealer for bonds when the dealer acts as principal in a transaction i.e., the dealer sells bonds that he owns, as opposed to an agency transaction (see "agency transaction").
- non callable bond
- A bond that cannot be called for redemption at the option of the issuer before its specified maturity date.
- Short-term promises to pay specified amounts of money, secured usually by specific sources of future revenues, such as taxes, federal and state aid payments, and bond proceeds.
- notice of sale
An official document disseminated by an
issuer of municipal securities that gives
pertinent information regarding an upcoming bond issue and
invites bids from prospective underwriters.
Return to Top
- offering price
- The price at which members of an underwriting syndicate for a new issue will offer securities to investors.
- official statement
- The document prepared by or for the issuer that gives in detail security and financial information about the issue.
- optional redemption
- A right to retire an issue or a portion thereof prior to the stated maturity thereof during a specified period of years. The right can be exercised at the option of the issuer or, in pass-through issues, of the primary obligor. "Optional redemption" usually requires the payment of a premium for its exercise with the amount of the premium decreasing the nearer the option exercise date is to the final maturity date of the issue.
- original delivery
- See " initial delivery."
- Over-the-Counter Market (OTC)
- A securities market that is conducted by dealers throughout the country through negotiation of price rather than through the use of an auction system as represented by a stock exchange.
- overlapping debt
On a municipal issuer's financial statement
"overlapping debt" is the debt of other issuers which
is payable in whole or in part by taxpayers of the subject
issuer. As an example, a county usually includes several
smaller governmental units and its debt is apportioned to them
for payment based on the ratio of the
assessed value of each smaller
unit to the assessed value of the county. Another example is
when a school district includes two or more municipalities
within its bounds. In each example "overlapping debt"
is the proportionate share of the county and/or of the school
district borne by included subject issuer.
Return to Top
- par value
- The principal amount of a bond or note due at maturity.
- parity debt
- Securities issued or to be issued with equal and ratable claim on the same underlying security and source of payment for debt service.
- paying agent
- Place where principal and interest are payable. Usually a designated bank or the office of the treasurer of the issuer.
- Shorthand reference to 1 percent. In the context of a 'bond,' a 'point' means $10 since a 'bond' with this reference means $1,000 (no matter what the actual denominations of the bonds of the issue). An issue or a security that is " discounted two points" is quoted at 98 percent of its par value.
- pollution control bond
- A debt security issued by a state, certain agencies or authorities, a local government, or a development corporation to finance the construction of air or water pollution control facilities or sewage or solid waste disposal facilities pursuant to federal law. The bonds are backed by the credit of the beneficiary of the financing rather than the credit of the issuer. New issues of these bonds are prohibited under the 1986 Tax Reform Act.
- The amount by which the price of or offered for an issue or a security exceeds its par value stated in terms of "priced at 102" (i.e., 102 percent of the face amount) or, in the case of the original purchase price from an issuer, of a premium of specified dollars (a "premium of $X").
- prepayment provision
- Provision specifying that, and at what time and on what terms, repayment of the principal amount may be made by the issuer prior to the stated maturity. Includes " call," but "prepayment" usually connotes less formal procedures than a call.
- Security price, generally quoted either in terms of percent of par value (e.g., premium price = 102, discount price = 99) or in terms of annual yield to maturity (e.g., "yielding 73/8 percent").
- primary market (new-issue market)
- Market for new issues of municipal bonds and notes.
- The face amount of a bond, which the issuer promises to pay at maturity.
- put bond
A put is an option given to the holder of a
bond to "put", or tender, the
bond to an issuer (or
trustee or tender agent)and demand
purchase of the bond at a stated time before maturity, or upon
the occurrence of particular circumstances.
Return to Top
- rate covenant
- A covenant in the financing proceedings requiring the charging of rates or fees for the use of specified facilities or operations at least sufficient to achieve a stated minimum coverage (see " coverage").
- Designations used by rating services to give indications of relative credit quality.
- Sales of a new issue, the proceeds of which are to be used, immediately or in the future, to retire an outstanding issue by, essentially, replacing the outstanding issue with the new issue. The purpose of "refunding" may be to save interest cost, extend the maturity of the debt, or to eliminate existing restrictive covenants.
- A formal re-underwriting of a bond for which the form or structure is being changed. Most commonly used in connection with changing variable rate to fixed rate financing s, typically because "the construction phase is over"; or rates are at a level the issuer feels comfortable with for the long-term; or because of indenture requirements (probably relating to arbitrage).
- registered securities
- Securities registered "on the book" of the issuer or trustee as to ownership, the transfer of ownership (and of the right to payment) of which must be registered with the issuer or trustee.
- revenue anticipation note (RAN)
- Rans are issued in anticipation of other sources of future revenue other than taxes, typically federal or state aid
- revenue bond
A bond on which the
debt service is payable solely from
the revenue generated from the operation of the project being
financed or a category of facilities, or from other non-tax
Return to Top
- secondary market
- Market for issues previously offered or sold.
- selling group
- A selling group includes dealers or brokers that have been asked to join in the offering of a new issue of securities, but are neither liable for any unsold syndicate balance nor share in the profits of the overall syndicate. They obtain securities for sale less than the takedown.
- serial bonds
- All, or a portion of, an issue with stated maturities (as opposed to mandatory sinking fund redemption amounts) in consecutive years.
- settlement date
- The date, usually five business days after the trade date, on which payment is made and securities are delivered for payment (see " trade date").
- sinking fund
- Separate accumulation of cash or investments (including earnings on investments) in a fund in accordance with the terms of a trust agreement or indenture, funded by periodic deposits by the issuer (or other entity responsible for debt service), for the purpose of assuring timely availability of monies for payment of debt service. Usually used in connection with term bonds.
- special tax bond
- A bond secured by a special tax, such as a gasoline tax or a sales tax.
- The difference between the price at which an issue is purchased from an issuer and that at which it is reoffered by the underwriters to the first holders.
- A transaction in which an investor sells one security and simultaneously buys another with the proceeds, usually for about the same price and frequently for tax purposes.
A group of underwriters formed for the purpose of participating
jointly in the initial public offering of a new issue of
municipal securities. The terms under which a
"syndicate" is formed and operated are typically set
forth in an "agreement among underwriters." Those
terms will establish the pro rata participation of each
syndicate member, the methods by which
offering prices and other terms
of sale will be established, in what priority orders for
securities will be taken and confirmed and the joint or several
nature of the liability assumed by each member for the purchase
of unsold securities. The purpose of a "syndicate"
formation is to share the risk of the offering among
participating underwriters and to establish a distribution
network in which to market the offered securities. One or more
underwriters will act as
manager of the "syndicate" and
one of the managers will act as lead manager and "run the
book." A "syndicate" is also often referred to
as an "account" or "underwriting account."
Return to Top
- The discount from the list price allowed to a member of an underwriting account on any bonds purchased from the account.
- tax anticipation note (TAN)
- TANs are issued by states or municipalities to finance current operations in anticipation of future tax receipts.
- tax base
- The total property and resources subject to taxation (see " assessed valuation").
- tax-exempt commercial paper
- This is a short-term promissory note issued for periods up to 270 days, and is often used in lieu of BANs, TANs, and RANs because of the greater flexibility offered in setting both matures and determining rates.
- technical default
- A default under the bond indenture terms, other than nonpayment of interest or principal. Examples of technical default are failure to maintain required reserves of the maintain adequate fees and charges for service.
- term bonds
- Bonds of an issue that have a single stated maturity date. Typically, an issuer is required to call or purchase a certain amount of the term bonds at regular intervals before the stated maturity date using money set aside in a sinking fund.
- total bonded debt
- Total general obligation bond debt outstanding of a municipality, regardless of the purpose.
- trade date
- The date that a trade, or sale and purchase, is consummated, with settlement to be made later (see " settlement date").
- transcript of proceedings
- Documents relating to a municipal bond issue.
- true interest cost
- A method of calculating bids for new issues of municipal securities that takes into consideration the time value of money (see " net interest cost").
- true yield
- The rate of return to the investor taking into account the payment of capital gains at maturity on a bond bought at a discount.
- trust agreement
- Agreement between an issuer and a trustee acting on behalf of bondholders (1) authorizing and securing the bonds; (2) containing the issuer's covenants and obligations with respect to the project and payment of debt service; (3) specifying the events of default; and (4) outlining the trustee's fiduciary responsibilities and bondholders' rights.
A bank designated by the
issuer as the custodian of funds and
official representative of bondholders. "Trustees"
are appointed to insure compliance with the contract and
represent bondholders to enforce their contract with the
Return to Top
- to purchase a bond or note issue from an issuer to resell it to investors.
- underwriting spread
- The difference between the offering price to the public by the underwriter and the purchase price the underwriter pays to the issuer. The underwriter's expenses and selling costs are usually paid from this amount.
- unit investment trust (municipal)
- A fixed portfolio of tax-exempt bonds sold in fractional, undivided interests (usually $1,000).
- unlimited tax bond
bond secured by the pledge of taxes
that are not limited by rate or amount.
Return to Top
- variable-rate demand obligation (VRDO)
A bond which bears
interest at a variable or floating rate
established at specified intervals (e.g., daily, weekly, or
monthly) and which contains a put option permitting the
bondholder to tender the bond for purchase on the date a new
interest rate is established.
Return to Top
- yield to maturity
- A yield concept based on the assumption that the bond is held to maturity and that all interest received over the life of the bond is reinvested at the coupon rate of interest. The concept is used when a transaction is done at a price other than at par.
- zero-coupon bond
- A bond that is issued at a deep discount and which bears no stated rate of interest. Like a Series E savings bond, the bond is bought at a discount price which implies a stated rate of return calculated on the basis of the bond being payable at par at maturity.