deep-discount bond

Also found in: Dictionary, Acronyms.

Deep-discount bond

A bond issued with a very low coupon or no coupon that sells at a price far below par value. A bond that has no coupon is called a zero-coupon bond.

Deep Discount Bond

A bond or other debt instrument that is issued at a price far below its face value. For example, a bond with par of $10,000 might be issued to an investor for $5,000. Junk bonds are often deep-discount bonds.

deep-discount bond

1. A long-term debt security that, because of a low coupon rate of interest compared with current rates of interest, sells at a substantial discount from face value. Bonds of this type, if not originalissue discounts, are preferred by some investors because they are unlikely to be called before maturity. See also municipal convertible, zero-coupon bond.