Par Bond
A bond that trades at exactly its face (par) value because its coupon rate matches the prevailing market yield for comparable bonds.
What is Par Bond?
A par bond is a bond whose market price equals its face value (typically $1,000 per bond)—meaning the bond trades 'at par.' A bond trades at par when its stated coupon rate equals the current market yield demanded for bonds of that maturity and credit quality: investors receive exactly the required return from the coupon alone, so there is no reason to pay more or less than par. Newly issued bonds are typically priced at or near par. Bonds move away from par as market interest rates change or credit conditions shift: rising rates push prices below par (discount bond), while falling rates push prices above par (premium bond).
Example
A newly issued 5-year corporate bond with a 5.50% coupon is priced at par ($1,000) when market yields for comparable bonds are exactly 5.50%. Six months later, if market yields rise to 6.00%, the bond's price falls to approximately $958 (a discount bond); if yields fall to 5.00%, it rises to approximately $1,042 (a premium bond). The par price is the fulcrum around which bond prices oscillate as market yields change.