Deep-Discount Bond


DEFINITION of 'Deep-Discount Bond'

1. A bond that sells at a significant discount from par value.

2. A bond that is selling at a discount from par value and has a coupon rate significantly less than the prevailing rates of fixed-income securities with a similar risk profile.

BREAKING DOWN 'Deep-Discount Bond'

1. Typically, a deep-discount bond will have a market price of 20% or more below its face value. These bonds are perceived to be riskier than similar bonds and are thus priced accordingly.

2. These low-coupon bonds are typically long term and issued with call provisions. Investors are attracted to these discounted bonds because of their high return or minimal chance of being called before maturity.

  1. Coupon

    The interest rate stated on a bond when it's issued. The coupon ...
  2. Bond

    A debt investment in which an investor loans money to an entity ...
  3. Par Value

    The face value of a bond. Par value for a share refers to the ...
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    A life insurance policy which allows for the transferable assignment ...
  5. Junk Bond

    A colloquial term for a high-yield or non-investment grade bond. ...
  6. Callable Bond

    A bond that can be redeemed by the issuer prior to its maturity. ...
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