Glossary term
At Par
At par means a security is priced at its face value, most commonly 100% of a bond's principal amount.
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What Does At Par Mean?
At par means a security is priced at its face value. In bond markets, that usually means the bond trades at 100% of its principal amount, such as $1,000 for a bond with a $1,000 face value. A bond trading above that level is trading at a premium. A bond trading below that level is trading at a discount.
The phrase can also appear in stock and corporate law contexts, where par value is a nominal legal amount assigned to shares. In everyday investing, however, at par most often refers to bonds and other fixed-income instruments.
Key Takeaways
- At par means price equals face value.
- For many bonds, par is quoted as 100, meaning 100% of face value.
- A bond above par trades at a premium; a bond below par trades at a discount.
- Par value is not the same as market value once the security is trading.
- Interest rates, credit risk, time to maturity, and coupon rate can move a bond above or below par.
How It Works in Bonds
A bond's par value is the amount the issuer promises to repay at maturity, assuming no default and no special redemption terms. Coupon payments are often calculated as a percentage of par value. A 5% coupon on a $1,000 par bond means $50 of annual coupon interest, usually paid in installments according to the bond's terms.
If the bond's coupon rate roughly matches current market yields for similar risk and maturity, the bond may trade near par. If market yields rise above the coupon, investors may demand a discount. If market yields fall below the coupon, investors may pay a premium.
Example
Suppose a corporate bond has a $1,000 face value and trades at 100. It is trading at par, so the market price is $1,000 before accrued interest and transaction costs. If the same bond trades at 97, it is priced at 97% of par, or $970. If it trades at 103, it is priced at 103% of par, or $1,030.
Those price differences matter because the investor's yield depends on both the coupon income and the price paid relative to the amount expected at maturity.
What It Signals
At par is a reference point, not a valuation verdict. A bond at par may be fairly priced, overpriced, or underpriced depending on credit risk, liquidity, optional redemption features, taxes, and comparable yields. The par price simply tells the reader where the market price sits relative to face value.
For newly issued bonds, pricing at par can be convenient because the coupon is set near the market yield at issuance. In the secondary market, prices usually move as conditions change. A bond can migrate above or below par even if the issuer remains financially healthy.
The Bottom Line
At par means a security is priced at its face value. For bonds, it is the midpoint between trading at a discount and trading at a premium, but investors still need to evaluate yield, credit quality, call features, taxes, and liquidity before drawing conclusions.