Below Par

AAA

DEFINITION of 'Below Par'

A term describing a bond whose price is below the face value or principal value, usually $1,000. As bond prices are quoted as a percentage of face value, a price below par would typically be anything less than 100.

INVESTOPEDIA EXPLAINS 'Below Par'

A bond trading below par is the same as a bond trading at a discount. When a bond trades below par, its current yield is higher than its fixed coupon rate.

Bonds may trade below par when interest rates have risen since it was issued, its credit rating has declined, there are concerns about a default, or there is an excess supply. A bond's discount may narrow as it approaches maturity or its first call date, when investors will receive par value.

RELATED TERMS
  1. Bond Rating

    A grade given to bonds that indicates their credit quality. Private ...
  2. Call Date

    The date on which a bond can be redeemed before maturity. If ...
  3. Par

    1. The face value of a bond. Generally $1,000 for corporate issues, ...
  4. Discount Bond

    A bond that is issued for less than its par (or face) value, ...
  5. Face Value

    The nominal value or dollar value of a security stated by the ...
  6. Bond Discount

    The amount by which the market price of a bond is lower than ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Bonds & Fixed Income

    Bond Call Features: Don't Get Caught Off Guard

    Learn why early redemption occurs and how to avoid potential losses.
  2. Bonds & Fixed Income

    Junk Bonds: Everything You Need To Know

    Don't be fooled by the name - junk bonds may be for you if you know how to analyze them.
  3. Bonds & Fixed Income

    Understanding Bond Prices and Yields

    Understanding this relationship can help an investor in any market.
  4. Bonds & Fixed Income

    How Bond Market Pricing Works

    Learn the basic rules that govern how bond prices are determined.
  5. Forex Education

    How To Compare Yields On Different Bonds

    Find out how to equalize and compare fixed-income investments with different yield conventions.
  6. Bonds & Fixed Income

    Why Didn't Quantitative Easing Lead To Hyperinflation?

    Hyperinflation is an exponential rise in prices and tends to occur not when countries print too much money, but is instead associated with a collapse in the real underlying economy.
  7. Bonds & Fixed Income

    Figuring Out How To Cover Your Liability Bases

    Whenever we talk about the asset-liability approach to portfolio management (ALM), the concepts of immunization and cash flow matching come into play.
  8. Economics

    What Would Happen If Interest Rates Rise?

    This time around, while U.S. long-term yields have rebounded from their January lows, rates have generally been lower than where they ended 2014.
  9. Investing

    Strategies To Position Your Bond Portfolio

    Fixed income investors may not be able to see them all right now, but important trends are stirring on the investment horizon.
  10. Investing

    The Impact Of A Stronger Dollar In The Markets

    The economy continues to improve, but also demonstrated that some areas of the stock market are more vulnerable to an increase in interest rates.

You May Also Like

Hot Definitions
  1. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  2. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  3. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  4. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  5. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  6. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
Trading Center