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Zero-coupon bonds often sell at a sizable discounts to face value because buyers do not get a steady stream of income as they do with traditional bonds. As zero-coupon Treasurys get close to maturity, their value increase with buy-and-hold investors getting the full value of the bond when it matures.

Because zero-coupons do not deliver regular income, the bonds and ETFs such as ZROZ are vulnerable to increase in short-term interest rates

For more news on Interest Rates and ETFs, visit our Interest Rates category.

PIMCO 25+ Year Zero Coupon US Treasury