Below Par

Filed Under » ,
Dictionary Says

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 Says

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.

Articles Of Interest

  1. How Bond Market Pricing Works

    Learn the basic rules that govern how bond prices are determined.
  2. 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. How To Compare Yields On Different Bonds

    Find out how to equalize and compare fixed-income investments with different yield conventions.
  4. Get Acquainted With Bond Price/Yield Duo

    Understanding this relationship can help an investor in any market.
  5. Bond Call Features: Don't Get Caught Off Guard

    Learn why early redemption occurs and how to avoid potential losses.
  6. Perpetual Bonds: An Overview

    A perpetual bond makes interest payments to the investor forever. This type of bond holds a certain appeal to both the issuer and buyer.
  7. Introduction To STRIPS

    STRIPS provide an alternative form of bond for fixed-income investors who need definite cash flows at specific times. Read the article to find out how.
  8. The Wonders Of Convertible Bonds

    Ever wondered what exactly a convertible bond does? Read the features of a convertible bond and learn how important the conversion factor is to you as an investor.
  9. The Basics Of The T-Bill

    The U.S. government has two primary methods of raising capital. One is by taxing individuals, businesses, trusts and estates; and the other is by issuing fixed-income securities that are backed ...
  10. Introduction To Commercial Paper

    Commercial paper is a short-term instrument that can be a viable alternative for retail fixed-income investors looking for a better rate of return on their money.
comments powered by Disqus
Marketplace
Hot Definitions
  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...
  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.
  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.
  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.
  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center