Devoted to understanding the basics and fundamentals of investing

In the bond world it is common to split the principle and interest payment streams.  When you do this with a US Treasury Bond, they call it a Strip (the bond is stripped of its interest.)  You end up with two instruments, an IO (Interest Only) and a PO (Principle Only) or Zero Coupon Bond. 

The Zero Coupon Bond does not have any periodic payments associated with it.  You only get a principle payment at maturity.  The bonds trade at a discount related to the time left to maturity and the prevailing interest rates.  They have the most duration (price change risk) of any type of bond.  For any change in interest rates, the price of a zero will change more than any bond which bears interest. 

The higher the prevailing market interest rate, the greater the discount on the zero.  The ideal time to buy a Zero Coupon Bond is when long-term interest rates top out.   Then, as interest rates decline, the zeros appreciate in price faster than any other bonds.

Now go out and make some money!