Zero coupon bonds

These bonds can be purchased at a deep discount and redeemed at a set date at face value.

Zero coupon bonds (or STRIPS) are bonds you can purchase at a deep discount and redeem at a set date (maturity date) at face value.

These bonds compound semi-annually at the corresponding yield that you lock in at the time of purchase. Unlike other bonds, zero coupon bonds don't pay interest regularly.

Zero coupon bonds offer the following features:

  • Price changes – The value of your bond will change daily with fluctuations in interest rates as well as company specific news. 
  • Liquidity – You can sell zero coupon bonds at their market value at any time before the maturity date.
  • Phantom income – You must pay taxes on the "phantom income" or "accreted value" each year you own a zero coupon bond on an annual basis.

Current rates

Get up-to-date information on our current bond rates, along with the latest rates on our Government Investment Certificates (GICs) and other fixed-income investments. Learn more.

These securities are derived from Government of Canada, Provincial Government, and Corporate bonds. The coupons are removed and sold as different securities. The zero coupon security carries the same backing as the original bond. Market and interest risks are greater with zero coupon securities than with the original bond.

We can help

At Edward Jones, we can help you reach your financial goals. Contact your Edward Jones financial advisor today.