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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Issuance of bonds
John Sir help needed! I am confused after reading the following sentence:
“A bond that’s issued at Premium will always trade at a Premium, including at maturity.”
aren’t the bonds always issued at par in the primary market? And two if even if they are issued at a premium why can’t they ever fall below the par value? Let’s say the interest rates have risen significantly in the market, won’t it cause people to shift away from the already issued low coupon bonds?
Bonds do not have to be issued at their par/nominal value (although we assume they are in the exam unless told otherwise). However it is not true that they will always trade at a premium, for the reason you state.