Do zero coupon bonds have the longest duration?
Sarah Garza
Updated on February 10, 2026
In the case of a zero-coupon bond, the bond’s remaining time to its maturity date is equal to its duration. Generally, bonds with long maturities and low coupons have the longest durations. These bonds are more sensitive to a change in market interest rates and thus are more volatile in a changing rate environment.
What does a longer bond duration mean?
Generally, the higher the duration of a bond or a bond fund (meaning the longer you need to wait for the payment of coupons and return of principal), the more its price will drop as interest rates rise.
What is the duration of a zero bond?
Because zero coupon bonds make no coupon payments, a zero coupon bond’s duration will be equal to its maturity. • The longer a bond’s maturity, the longer its duration, because it takes more time to receive full payment.
How long do zero coupon bonds take to mature?
ten years
Zero-coupon bonds often mature in ten years or more, so they can be long-term investments. The lack of current income provided by zero-coupon bonds discourages some investors.
What do you need to know about zero coupon bonds?
What is a Zero-Coupon Bond? 1 Understanding Zero-Coupon Bonds.As a zero-coupon bond does not pay periodic coupons, the bond trades at a discount to its face value. 2 Pricing Zero-Coupon Bonds. 3 Example of a Zero-Coupon Bonds. 4 Reinvestment Risk and Interest Rate Risk. …
What is the Macaulay duration of a zero coupon bond?
The Macaulay duration of a zero-coupon bond is equal to the time to maturity of the bond. Simply put, it is a type of fixed-income security that does not pay interest on the principal amount.
What’s the difference between a coupon bond and a regular bond?
Regular bonds, which are also called coupon bonds, pay interest over the life of the bond and also repay the principal at maturity. A regular bond pays interest to bondholders, while a zero-coupon bond does not issue such interest payments.
What does OID mean for zero coupon bonds?
In the United States, a zero-coupon bond would have original issue discount (OID) for tax purposes. Instruments issued with OID generally impute the receipt of interest (sometimes called phantom income), even though these bonds do not pay periodic interest.
