What is a 'Discount Note'
A shortterm debt obligation issued at a discount to par. Discount notes are similar to zerocoupon bonds and Treasury bills and are typically issued by governmentsponsored agencies or highly rated corporate borrowers. Discount notes do not make interest payments; instead the bond is matured at a par value above the purchase price, and the price appreciation is used to calculate the investment's yield.
Discount notes will have maturity dates of up to one year in length.
BREAKING DOWN 'Discount Note'
The biggest issuers of discount notes are Freddie Mac and the Federal Home Loan Banks. Most institutional fixedincome buyers will compare the yieldtomaturity (YTM) of various zerocoupon debt offerings with standard coupon bonds, looking for yield pickup in discount bonds.

Discount
The condition of the price of a bond that is lower than par, ... 
Discount Bond
A bond that is issued for less than its par (or face) value, ... 
Discount Yield
Discount yield is a measure of a bond's percentage return. Discount ... 
Market Discount
The difference between a bond's stated redemption price and its ... 
Bond Discount
The amount by which the market price of a bond is lower than ... 
Bank Discount Rate
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Investing
Explaining Original Issue Discount
An original issue discount is the amount below par at which a bond or other debt instrument is issued. 
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All About Zero Coupon Bonds
Zerocoupon bonds are bonds that do not make any interest payments (which investment professionals often refer to as the "coupon") until maturity. For investors, this means that if you make an ... 
Investing
Calculating Bond Equivalent Yield
The bond equivalent yield calculates the semiannual, quarterly or monthly yield on a discount bond or note. 
Investing
How To Evaluate Bond Performance
Learn about how investors should evaluate bond performance. See how the maturity of a bond can impact its exposure to interest rate risk. 
Investing
ZeroCoupon Bond
A zerocoupon bond or ‘no coupon’ bond is one that does not disburse regular interest payments. Instead, the investor buys the bond at a steep discount price; that is, at a price ... 
Investing
How Do I Calculate Yield To Maturity Of A Zero Coupon Bond?
Yield to maturity is a basic investing concept used by investors to compare bonds of different coupons and times until maturity. 
Investing
Are Bonds Selling At A Premium A Good Investment?
A bond with a par value â€“ or face value  of $1,000 is selling at a premium when its price exceeds par.

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