The z-spread measures the flat spread over a benchmark yield curve that investors require to lend money to an issuer. The z-spread is often used to compare bonds from different maturities and different currencies.
Zero Coupon Bond
A zero coupon bond is a bond which capitalises interest instead of distributing coupons. Such bonds are then issued at a discount to their face value. While short-term debt securities are often zero coupons, longer maturity bonds generally involve regular interest payments. Longer term zero coupon bonds can, however, be constructed from any bond by separating its interest and principal payments to form two distinct instruments (a method called STRIPS ).