A point of business interest

Actually, zero-coupon bonds do not pay coupons (thus the clever name), which means they do not pay interest during the life of the bond. However, interest is certainly paid, since the total repaid to the bondholder when the bond expires will exceed the discounted amount paid to purchase the bond. For example, a one-year zero-coupon bond with a par value of 100 could be sold for 97 to achieve an interest rate of just over 3 per cent. Put more simply, all bonds pay interest.

Nevertheless, you are on to something: if the government could find hoards of buyers for zero-interest bonds, not only could it tame baht appreciation, it could also fund the Bt2-trillion infrastructure plan, free of financing charges! Let’s build another airport and dig that canal across the Kra Isthmus while we’re at it!

The author of the article also fully misunderstands “duration risks”, but I’ll leave that for another letter.

Dan Gallucci

Bangkok