Deferred-Interest Bond

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deferred-interest bond

A bond that does not pay interest for a specified period, typically three to ten years. At the end of the initial period, the interest payments on the bond begin in accordance with its coupon rate. Deferred-interest bonds generally sell at steep discounts to par during a period of deferred interest.

A bond that does not pay a coupon for a certain period of time. After this period, which is usually three to 10 years, coupon payments begin normally. These bonds sell at a discount to par during the time they are not paying coupons.

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