Deep Discount Bond

A bond issued at a discount to par value and redeemed at par or a premium to par at a very low issue price. Deep discounts have low coupons offering an investor high principal return and low interest income. They may either pay a low coupon over their lives (low coupon bonds) or no coupon at all (zero coupon bonds). The difference between the issue price and the redemption price is effectively interest on the amount borrowed.