DEFINITION of 'Pull To Par'

The movement of a bond's price toward its face value as it approaches its maturity date. Premium bonds, which trade at a higher price than their face (par) value, will decrease in price as they approach maturity. Discount bonds, which trade at a lower price than their par value, will increase in price as they approach maturity.

BREAKING DOWN 'Pull To Par'

Pull to par reflects the fact that investors require a specific return on their bond investment, given the bond's characteristics and overall market conditions. If investors require a 5% return, a premium bond that is issued for $106 will move toward $100 as it approaches maturity, and a discount bond that is issued for $96 will move toward $100 as it approaches maturity. The par bond's value will hold steady at $100.

RELATED TERMS
  1. Below Par

    A term describing a bond whose price is below the face value ...
  2. Par Value

    The face value of a bond. Par value for a share refers to the ...
  3. Discount Bond

    A bond that is issued for less than its par (or face) value, ...
  4. Par

    Short for "par value," par can refer to bonds, preferred stock, ...
  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 Articles
  1. Investing

    What is Par Value?

    Par value is a term used for investments that means original value. It’s also called face value or nominal value.
  2. Investing

    Are Bonds Selling At A Premium A Good Investment?

    A bond with a par value – or face value -- of $1,000 is selling at a premium when its price exceeds par.
  3. 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.
  4. Investing

    Understanding Face Value

    Face value is the dollar value stated on a security.
  5. Investing

    Explaining Original Issue Discount

    An original issue discount is the amount below par at which a bond or other debt instrument is issued.
  6. Investing

    Why Would A Stock Have No Par Value?

    A stock with no par value might trade for thousands of dollars. It just depends on what the market deems it’s worth.
  7. Investing

    Understanding Bond Quotes

    A bond quote is a bond’s trading price.
  8. Investing

    Top 6 Uses For Bonds

    We break down the stodgy stereotype to see what these investments can do for you.
  9. 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.
  10. Investing

    Understanding Bond Prices and Yields

    Understanding this relationship can help an investor in any market.
RELATED FAQS
  1. What happens to the price of a premium bond as it approaches maturity?

    Learn how bonds trade in regard to premiums and discounts, and how bond prices shift closer to par value as bonds approach ... Read Answer >>
  2. Will the price of a premium bond be higher or lower than its par value?

    Find out why the selling price of a premium bond is always higher than its par value, including how changing interest rates ... Read Answer >>
  3. Can the marginal propensity to consume ever be negative?

    Find out when a bond's yield to maturity is equal to its coupon rate, and learn about the basic components of bonds and how ... Read Answer >>
  4. What types of fees apply to checking accounts?

    Learn about the difference between a bond's coupon rate and its yield to maturity, and how the par value, coupon rate and ... Read Answer >>
  5. What is the difference between par value and market value?

    Learn about the difference between the par value and market value of financial securities, including the role they play in ... Read Answer >>
  6. How does face value differ from the price of a bond?

    Discover how bonds are traded as investment securities and understand the various terms used in bond trading, including par ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center