Module III· DCM — Investment Grade & Senior DebtIntermediate
Question

When does a bond trade at par, premium, or discount, and what does it mean?

Answer

A bond trades at par when price is around 100% of face value. It trades at a premium when price is above par, usually because coupon is above current required yield. It trades at a discount when price is below par, usually because coupon is below market yield or credit risk has increased. Price and yield move inversely.