Z bond refers to a type of bond that is created by restructuring existing bonds. It is also known as a stripped bond or a zero-coupon bond. Z bonds are derived from the cash flows of the underlying bonds by separating the interest payments from the principal amount.

The term "Z" in Z bond stands for zero-coupon, indicating that these bonds do not pay periodic interest like traditional bonds. Instead, they are issued at a discount to their face value and mature at par, with the investor receiving the full face value at the bond's maturity. The return on investment for Z bonds comes from the difference between the purchase price and the face value.

Z bonds are popular among investors seeking long-term fixed-income investments or those looking to match future liabilities, as they offer a predictable payout at maturity. They are also attractive to investors who want to customize the timing of their cash flows or manage their tax obligations.

While Z bonds provide the advantage of no reinvestment risk associated with coupon payments, they still carry other risks such as interest rate risk and inflation risk. Investors should carefully consider their investment objectives and risk tolerance before investing in Z bonds.