Zero
coupon bonds
In
India, zero coupon bonds are alternatively known as Deep Discount Bonds (DDBs).
These bonds became very popular in India for over a decade because of issuance
of such bonds at regular intervals by IDBI and ICICI. Zero coupon bonds have no
coupon rate, that is, there is no interest to be paid out. Instead, these bonds
are issued at a discount to their face value, and the face value is the amount
payable to the holder of the instrument on maturity.
Since
there is no intermediate payment between the date of issue and the maturity
date, these DDBs are also called zero coupon bonds.