Discount

A bond is said to be trading at a discount when its current market price is below its face (par) value. This occurs primarily when prevailing interest rates in the market are higher than the bond's fixed coupon rate, making the existing bond less attractive to new investors who can get higher yields on newly issued bonds. For example, a bond with a face value of ₹1,000 and a 6% coupon would trade at a discount if current market rates rise to 8%. Investors who purchase a discount bond and hold it to maturity will receive the full face value at redemption, with the price appreciation adding to their overall return alongside the coupon income.