Bonds trading at a discount


Bonds trading at a discount


A bond is considered a discount bond when it has a lower interest rate than the current market rate, and consequently is sold at a lower price. This interest rate, also called a coupon, is usually paid semiannually. As interest rates go up, bond prices go down. Bonds on the secondary market with fixed coupons will trade at discounts when market interest rates rise. While the investor receives the same coupon, the bond is discounted to match prevailing market yields. A premium bond trades above its issuance price— its par value.

A discount bond does the opposite bonds trading at a discount trading below value. There are no subject orders — all orders are firm. Undisplayed reserve interest will always yield to displayed orders at a particular price. All orders will only be matched with orders resident in the order book. In other words, the price you pay for a new bond (its original price) is always fixed and is called the par value.

A bond will trade at a premium when it offers a coupon (interest) rate that is higher than the current prevailing interest rates being offered for new bonds. A bond will trade.




Bonds trading at a discount

At trading bonds a discount

At trading bonds a discount



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